Types of Taxation Between Parties:
1. The party/party basis is defined as:
a. Unless otherwise ordered, the default basis of taxation costs are to be allowed on a party/party basis. Therefore, if the order simply awards costs without specifying the basis of taxation, costs are to be taxed as between party and party;
b. All costs necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed are to be allowed;
c. Under this test luxuries are not recoverable and by this the court mean things which make the conduct of the litigation more convenient to the litigant; such as senior counsel;
d. When considering whether the cost meets the “necessary or proper” test. The taxing master must consider the circumstances at the time the work was done, and not with the benefit of hindsight.
2. The solicitor/client basis (as of April 13 2013 called standard basis) is substantially a party and party taxation on a more generous scale; allowing all costs reasonably incurred and of reasonable amount.
a. An order at a solicitor/client basis made pre April 2013 is no different to a standard basis as far as practicality of what is claimed;
b. The test for the solicitor/client and standard basis is reasonableness and that it is more generous than party/party;
c. Unfortunately, the “standard basis” is often confused, both by the profession and judiciary, with the “solicitor/own client” basis, which in turn is confused with the “indemnity” basis, so the case law should be approached with caution;
d. Where costs are to be paid out of a fund or where a party sues or is sued as Trustee, the rules provide that costs are to be taxed on a solicitor/client basis.
3. Indemnity cost orders provide that on a taxation on an indemnity basis all costs shall be allowed except:
a. All costs incurred are to be allowed except to the extent that they are of an unreasonable amount or have been unreasonably incurred;
b. If the cost court has doubts at to whether costs should be allowed or not, these doubts should be resolved in favour of the party recovering costs;
c. On an indemnity basis parties cannot profit from a cost order and cannot recover more than they require to pay their solicitor.
4. There are four principal categories in which indemnity costs are awarded:
a. Misconduct or inappropriate conduct on the part of the unsuccessful party;
b. When the prosecution or defence of the proceeding ought not to have been undertaken or continued had the party been properly advised;
c. When proceedings are brought in the public interest or the nature of a test case;
d. When rules apply to allow such an order for cost arising from a settlement offer.
5. A fourth basis of taxation is known as “solicitor/own client” and is the basis for quantifying the costs which a client must pay to his solicitor. This basis is not generally relevant to taxations of costs between parties and is to be distinguished from an indemnity costs order.
a. The Victorian rules also provide that costs may be taxed on such other basis as the court may direct which would include fixing costs in a gross sum amount (or lump sum amount).
Daniel Epstein of Counsel
