FAQs - Taxation

FREQUENTLY ASKED QUESTIONS & ANSWERS
Taxation of Costs in Federal Jurisdictions

Federal Court & AAT

HIGH COURT

Federal Court & AAT

What is the most common path to taxation of costs?

The taxation process is outlined in Order 62 of the Federal Court Rules. The Rules permit the taxation process to be carried out in a variety of ways, at the discretion of the taxing officer, generally a Registrar. However, this procedure is the most common method used in the Sydney registry of the Court:

1. Draw an itemised Bill of Costs. The Bill must be endorsed with a certificate verifying the additions in the Bill. The most convenient way is to endorse it on the front sheet of the Bill. The certificate must be signed.
2. A calculator printout must be attached to the Bill which shows that the additions on each page are correct. Copies of disbursements should also be attached.
3. File the Bill of Costs. There is no filing fee or Application Form.
4. Without the parties being present, the Taxing Officer estimates the total the Bill would come to if taxed.
5. The Registrar notifies the parties of the estimate;
6. Either party may object to the estimate by filing and serving a Notice of objection within 14 days requiring a full taxation. A filing fee is payable.
7. The party liable for the costs should then file a notice of objection outlining the items objected to and reasons therefore.
8. The parties are then advised of the date for taxation and attend the taxation. There is a fee payable for the taxation.
9. The taxing officer hears the taxation and issues a certificate.
10. Either party can apply to the Court for a review if dissatisfied with the costs as taxed.

How are costs quantified - what is the test for costs?

The Federal Court deals only with costs between party and party. Costs between solicitor and client, even for matters conducted in the Federal Court, are dealt with through the NSW costs assessment system.

Costs in the Federal Court have not been deregulated. As such, party/party costs can only be claimed according to the Federal Court scale of costs. The costs allowed at scale are considerably less than the costs usually charged by practitioners in this jurisdiction and so the gap between solicitor/client and party/party costs is wider than ever

Order 62 Rule 19 of the Federal Court provides that “On every taxation the taxing officer shall allow all such costs charges and expenses as appear to him to have been necessary or proper for the attainment of justice or for maintaining or defending the rights of a party...”. The key words here are “necessary or proper”. However, in practice the costs that are allowed on taxation as party/party costs are those that are “necessary”.

How much will it cost?

There is no fee payable to file a Bill of Costs for estimate.

If you lodge a Notice of Objection to an estimate of costs that would be allowed on taxation made by the Registrar, there is a filing fee of $750 as security for the costs of the taxation: Order 62 Rule 46(3)(d).

The filing fee for an appointment to tax a Bill of Costs has traditionally been calculated at an amount per $100 claimed in the Bill, most recently being $8 for every $100 claimed. As such, a full taxation was often costs prohibitive where the amount of costs in dispute was substantial.

In July 2001, a flat fee was introduced. The current fees for an appointment to tax a Bill of Costs are as follows:

• Where the amount of the bill is less than $10,000 - $546; and
• Where the amount of the bill is more than $10,000 - $1,309.

Following the decision of Einfeld J in Re Stubberfield: Ex parte Paradise Grove Pty Ltd, the filing fee for a full taxation of a Bill of Costs is payable by the party in whose favour the costs order was made regardless of which party is seeking the full taxation.

Parties seeking a full taxation should be aware of the operation of Order 62 Rule 46 (4A) which provides that if a notice of objection or a notice requiring a full taxation is filed, the party filing the notice shall bear the costs of taxation of all parties from the date of filing the notice unless, on taxation, there is obtained in that party's favour a variation of at least 15% of the estimate of taxed costs or of the amount provisionally taxed.

As such, you will need to better the amount allowed on estimate by at least 15% to get the costs of the taxation.

How are costs recovered for work done in the AAT?

The Tribunal has the power under certain legislation to order or recommend that the respondent pay the costs, or part of the costs, of a successful applicant, or where the application has been instituted by the Commonwealth. Under the Safety, Rehabilitation and Compensation Act 1988, the Tribunal may also award costs to a person where the application has been instituted by the Commonwealth.

Unless the order determines otherwise, the costs payable may include:

• witness expenses at the prescribed rate;
• all reasonable and proper disbursements; and
• 75 percent of all professional costs, including counsel's fees, which would be allowable under the Federal Court Scale.

Costs will be assessed on a party and party basis.

Costs may be agreed between the parties. Where there is no agreement, a Registrar of the Tribunal will tax the bill, but may refer any question for the direction of the Tribunal. Either party may apply to the Tribunal for a direction on any question related to costs, before the taxation is concluded. HIGH COURT

What is the procedure for taxation of costs?

Taxations in the High Court are very “civilised”. Although each party or representative of that party must make oral submissions it is not as aggressive as are other Federal jurisdictions. However, the taxing officers, generally a Registrar of the Court, take quite a strict view of what is a party/party expense. The procedure for taxation is as follows:

1. Draw a Bill of Costs. Note that by virtue of Order 71 Rule 75 of the High Court Rules 1952, disbursements should be paid prior to service of the Bill of Costs.
2. File the Bill of Costs. The taxing officer appoints a time for the taxation.
3. At least two days prior to the taxation a copy of the bill, together with notice of the taxation, is given to the other party.
4. The filing fee is $9 per $100 or part thereof.
5. Parties attend the taxation before a taxing officer in chambers and after hearing all submissions, issues a Certificate of Taxation.

How are costs quantified - what is the test for costs?

The High Court deals only with costs between party and party. Costs between solicitor and client relating to matters conducted in the High Court are dealt with through the NSW costs assessment system.

Costs in the High Court have not been deregulated. As such, party/party costs can only be claimed according to the High Court scale of costs. The costs allowed at scale are considerably less than the costs usually charged by practitioners in this jurisdiction and so the gap between solicitor/client and party/party costs is wider than ever

Order 71 of the High Court Rules 1952 governs costs in the High Court. Pursuant to Rule 23 costs are allowed using the Second Schedule being a scale of costs somewhat similar to the Federal Court scale.

Order 71 Rule 74 provides that on taxation the taxing officer shall allow all such costs as are “necessary or proper for the attainment of justice or for maintaining or defending the rights of a party...” but not costs incurred through over-caution, negligence or mistake.

This is the traditional definition of “party/party” costs. When drawing a bill of costs bear in mind that the High Court takes the traditional restrictive view of the notion of party/party costs. A guide to understanding this concept is to ignore the word “proper” and just concentrate on whether the cost was “necessary”.

How much will it cost?

The filing fee for a taxation is $9 for every $100 or part thereof claimed in the Bill: Item 8, Part 1, Schedule 1 to the High Court of Australia (Fees) Regulations 1991.

Pursuant to Order 71 Rule 107, the fee payable for taxing a bill of costs is payable on completion of taxation whether or not a certificate of taxation is issued.

Taxation of Costs in the ACT Supreme Court

Costs in the ACT Supreme Court are quite different to costs in NSW matters.

There is a scale of costs which applies to all matters run in the Court. Except where otherwise ordered, solicitors may charge the costs set out in the scale on a party/party basis. Practitioners may contract out of the scale for their solicitor/client costs. The scale is contained in the Supreme Court Rules at Schedule 4.

The test for costs in the ACT is “necessary or proper for the attainment of justice or for enforcing or defending the rights of any party”; Order 65 Rule 53, Supreme Court Rules 1937. Our experience is that the taxing officers are quite strict.

If costs cannot be resolved by negotiation, they are taxed. The Bill is prepared and filed with the Court who mark the Bill with the date for the taxation. The annotated Bill is then served on the other party. A Notice of Objection may be filed.

The party liable for the costs may at any time after the making of the order for cost but not later than 14 days before the date of the taxation, tender a sum in payment of the costs and accrued interest. The tender may be replaced by another tender but may not be withdrawn until the earlier of the date of the taxation and 14 days. If the tender is not returned within this time, it is deemed to be accepted and the taxation will not go ahead. If the taxing officer considers an amount tendered to be appropriate, any costs after the day of the tender are borne by the party entitled to costs; Order 65 R 58.

GST is not claimed in the substantive part of the Bill in ACT matters. It is claimed as a disbursement at the end of the Bill.

Interest

By virtue of s.70 of the Supreme Court Act 1937, interest runs on a judgment debt. No claim is required for judgment interest. This applies to interest on costs, even though they will be taxed and thus quantified at a later date; Tarlinton –v- Hall (1981) 38 ACTR 1 at 8. The rates of interest are prescribed in Order 42A Rule 1 of the Rules. Parties usually obtain a Certificate of Taxation providing a figure for costs and then resolve interest by way of letter.

Taxation of Costs in the Family Court - retainer before 1 July 2008 and party / party costs

1. Can I claim costs in accordance with a costs agreement or must I apply the Scale?

   A solicitor may enter into a costs agreement pursuant to Rule 19.14 of the Family Court Rules 2004. The agreement must specify the type and the amount of work and either the costs payable for the work as a lump sum or the basis on which the costs will be calculated. The costs agreement cannot be conditional on the outcome of the client's case. The client must also receive a Costs Notice at the time of making the agreement. A copy of the Costs Notice is available on our website.

   If the costs agreement is valid, then then you may claim costs in accordance with the costs agreement. Otherwise, the amount recoverable for your work done is limited to the scale rates in Schedule 3 of the Family Court Rules 2004.

2. What is the procedure for recovery of costs?

   Please contact us for the latest information.

3. How are costs quantified – what is the test for costs?

   Rule 19.34 of the Family Court Rules 2004 provides the the assessment principles to be used by the registrar in making a costs assessment order. The fundamental principle is that the registrar is not to allow costs which are not 'reasonably necessary for the attainment of justice' and are not 'proportionate to the issues in the case'. This principle is varied depending on whether it is a solicitor/client or party/party assessment, and if it is a party/party assessment, whether the costs have been ordered on an indemnity basis.

4. How much will it cost?

   There are no filing fees for filing a Form 15 Notice Disputing Itemised Costs Account or Form 2 Application in a Case into the Family Court.