If you win a civil case in New Zealand, the court will usually order the other side to pay some of your legal costs, but almost never all of them. If you lose, you can expect to pay part of theirs on top of your own. It is worth understanding how this works before you decide to sue, defend or settle.
Two kinds of costs
Your own lawyer's bill is between you and your lawyer, and it is payable whatever the outcome. Costs in the court's sense are something else: a sum one party is ordered to pay towards the other party's legal expenses. The two figures are rarely the same.
The general rule: the loser pays
Costs are always at the judge's discretion. In the District Court and the High Court the starting point is that the unsuccessful party pays costs to the successful one.
How the amount is set
An award is not usually based on what the winner actually spent. The court rules contain a scale. The case is given a category according to its complexity, which sets a daily rate, and each step, such as filing a claim or preparing for trial, carries a set allowance of time. The rates are designed to reflect about two-thirds of a reasonable fee, not the whole of it, and real bills often exceed what the scale assumes. A successful party can therefore be left well out of pocket.
Disbursements, such as court filing and hearing fees and the reasonable cost of expert witnesses, can generally be recovered in addition.
To see what the scale produces for a particular case, try Two Bees, a court costs calculator from the makers of lawdbl. It works out scale costs under both the High Court Rules and the District Court Rules.
When the court departs from the scale
- Increased costs may be ordered where a party added unnecessarily to the time or expense of the case, for example by running arguments with no merit or unreasonably refusing to settle.
- Indemnity costs, meaning the winner's actual reasonable costs, are reserved for serious misconduct, or for cases where a contract such as a lease or loan agreement entitles a party to them.
- Reduced costs, or none, may follow where the winner succeeded only in part or behaved unreasonably.
Settlement offers matter
A written offer made "without prejudice except as to costs" can be shown to the judge once the case is decided. If the other side rejected it and then did no better at trial, the court can take that into account. A party who turned down a sensible offer may have to pay costs even though they technically won.
Some special cases
- In the Disputes Tribunal lawyers do not appear, the filing fee is modest, and costs are rarely awarded.
- A party on legal aid is usually protected from a full costs order unless there are exceptional circumstances.
- People who represent themselves generally cannot claim for their own time, only for their disbursements.
- On an appeal, you may be required to pay security for costs up front.
What this means for you
Litigation is a financial decision as much as a legal one. At the outset, ask your lawyer for three figures: what your own costs are likely to be, what you might recover if you win, and what you could be ordered to pay if you lose.
This article is general information, not legal advice. If you need help with a dispute, describe your situation to lawdbl and we will suggest lawyers who do this work.