Victorian Supreme Court Review Rejects Litigious Scale of Costs

A report (the Report) into whether Victoria’s Supreme Court should continue to use the Scale of Costs (the Scale) in fixing party/party litigious costs has rejected the concept of retaining or revising it.

Review recommends two-stage approach

Released on 23 August 2022, the Report follows a review by the Hon Justice Jack Forrest and Her Honour Kathryn Kings that commenced in October 2021. It adopts a two-staged approach to the costs assessment mechanisms replacing the Scale (known formally as Appendix A of the of the Supreme Court (General Civil Procedure) Rules 2015).

First stage

In the short term the Report recommends that guidelines setting out hourly and daily rates, ie time-costing guidelines (the Guidelines), be implemented. These aim to simplify the measure of costs and enhance transparency of reasonable charging rates.

Second stage

In the medium term, the Report recommends that mechanisms be adopted to prospectively set limits on litigious party/party costs. These would be similar to those currently used in England and Wales (the English and Welsh model) (see below).

The Report identifies two significant aspects of the Scale:

1. it is the mandatory form of assessment if a party wishes to enforce a costs order or agreement made against another party in litigation (ie the assessment of party/party litigious costs); and
2. it is also used in two significant areas of practice in both Courts in fixing lawyer/client costs, namely personal injuries/death claims and estate/testators’ family maintenance (TFM) claims.

The Guidelines

The Report recommends the Guidelines be based upon the NSW Guidelines 2016, with necessary modification to reflect Victorian practice. The Guidelines should, as a minimum, set out reasonable hourly and daily rates in accordance with the experience of the practitioner or counsel.

Matters needing consideration for successful implementation may include some or all of these:

1. There is no legislative authority for the NSW Guidelines 2016;
2. The NSW Guidelines 2016 are clearly not up to date;
3. There is no comprehensive publicly accessible database available for use;
4. Existing databases, which may or may not be useful, are held by private organisations like litigation funders insurers and costs lawyers for their own purposes; and
5. Integration with the Guidelines to be used in the medium-term mechanisms.

Points 1-5 above challenge the conclusion, expressed in para 39 of the Report, that there is sufficient empirical information for their Honours to implement their tasks.

The English and Welsh model

The English and Welsh costs model currently used in litigation in England and Wales – and which will eventually be completely digitalised – is a combination of fixed recoverable costs (FRC) and Costs Budgeting. The benefits of these approaches include improved transparency, consistency and comprehension.

The Report recommends that FRC be piloted in certain types of litigation – specifically, in:

1. personal injuries proceedings involving transport accident and WorkCover claims; and
2. TFM proceedings.

In such cases clients are more likely to be ‘unsophisticated’ and would benefit from the prospective certainty provided by the regime. However, on application to the Court, a complex case might be excluded from FRC.

Because the introduction of FRC may bring about an increase in the amount of lawyer/client costs, resulting in the client receiving a lesser sum than they would now receive, the Report suggests that a similar approach to that currently taken in Workcover (common law) proceedings should apply to all cases within FRC. The Workplace Injury Rehabilitation and Compensation Act 2013 (Vic) mandates that lawyer/client costs in such common law cases can only be recovered pursuant to an order of the Court. This approach is currently administered by the Supreme and County Courts, on occasions with assistance from the Costs Court. The Report suggests that the approach could be extended to transport accident cases in the FRC model.

Costs budgeting

In the current English and Welsh costs model Costs Budgeting involves court approval of “costs budgets” submitted by parties shortly after the commencement of a proceeding.

Role of Costs Court

Under the Uniform Law the Costs Court provides the appropriate level of supervision of lawyer/client litigious costs. The Report recommends that Its role as the final arbiter of both party/party costs and lawyer/client litigious costs continue under the proposed changes and that the operation of any new scheme be overseen by the Costs Court.

A strategic and holistic look at costs?

We have referred to the current English and Welsh model because at the request of the Master of the Rolls, Sir Geoffrey Vos, the Civil Justice Council (CJC) presently has under consideration a strategic and holistic look at costs which it describes in the CJC’s Costs Working Group Consultation Paper issued in June 2022 (Consultation Paper) as covering these four areas (Consultation Paper paras 1 and 3):

1. Costs Budgeting.
2. Guideline Hourly Rates;
3. Costs under pre-action protocols/portals and the digital justice system;
4. Consequences of the existing extension of FRC.

The first phase of the exercise was the publication of the Consultation Paper. This set out the questions to be considered and explained the context in which they arose .

The second phase is the present consultation phase. This originally invited responses and reactions to the questions raised in the Consultation Paper by Friday 14 October (Consultation Paper para 2). However it has now been extended to Thursday 15 December 2022 due to the large number of responses and to allow for consideration of the decision of as the Court of Appeal’s recent decision in Darya Belsner v Cam Legal Services Ltd [2022] EWCA Civ 1387. to allow.

Some preliminary thoughts on the implementation of the Report

The focus of the review should be limited to the assessment of party/ party litigious costs. Subject to the requirements of the Application Act in each jurisdiction the Uniform Law in Victoria, New South Wales and Western Australia addresses the requirements of what is fair and reasonable in lawyer /client costs.

It should not be assumed that technological advances translate to reduced costs and greater access to justice. It will be important to critically assess the present and future impacts of legal technology.

The focus of the proposed changes is now prospective not reactive. This requires consideration of costs management as well as costs recovery. For example, guideline hourly rates can and should make clear that they apply to work done by Australian lawyers wherever and however they carry out that work. Additionally they can and should apply to the proliferating Alternative Legal Service Providers (ALSPs) and specialist related disciplines engaged in the performance of the work of Australian lawyers.

Lastly, such a focus should allow the elimination of some. if not all, of the negative features of time costing such as the rapacity encountered in the use of the minimum six-minute unit.