If you have received a costs order after a court case or a bill from your own lawyer, you may have come across two confusing terms: party party costs and solicitor client costs. The short answer is that they describe two different relationships. Party party costs are what one party to litigation can recover from the other party under a court order. Solicitor client costs are what a client owes their own law practice under a costs agreement. The distinction is similar to the amount you pay your GP for treatment (the “solicitor/client” cost) and the amount you receive back from Medicare for that treatment (the “party/party” cost).
The two are calculated differently, they apply in different circumstances, and they almost always produce different amounts. The distinction matters, because it determines how much of your legal spend you can realistically recover, or are required to pay. This guide explains the difference between the two in New South Wales, and how each is assessed.
What Do Party Party Costs Cover?
Party party costs are the costs that a court or tribunal orders one party to pay another. They usually require the unsuccessful party to contribute to the successful party’s legal costs.
They reflect a general principle: costs follow the event. In other words, the losing side typically bears a portion of (but not all of) the winner’s costs.
A point of terminology is worth noting here. In NSW, the costs payable under a court order are now formally described as “ordered costs”. Many lawyers, clients, and even older judgments still call them party party costs or inter partes costs, so you will see the terms used interchangeably.
Whatever the label, the key feature is the same. These are costs payable by an opposing party under an order or rule of a court or tribunal. They are not costs payable to your own lawyer.
Two things to keep in mind about party party costs:
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They commonly provide only a partial reimbursement of what a successful party has spent. They do not cover every item of legal work.
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The costs allowed are what are “fair and reasonable” as between parties, rather than simply matching the invoice sent to the client by the lawyer.
As a result, recovery on this basis is usually less than the total a party has paid their own solicitor.
What Do Solicitor Client Costs Cover?
Solicitor client costs are the costs payable by a client to their own law practice for the legal services provided to them. They are governed by the costs agreement between the client and the lawyer, and they represent the professional fees and disbursements the client has agreed to pay.
This remains subject to one overriding requirement: legal costs must be fair and reasonable.
Solicitor client costs are not the same as indemnity costs
It is important not to confuse the two:
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Solicitor client costs describe the relationship between a client and their own lawyer.
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Indemnity costs are a basis on which a court may order one party to pay another party’s costs. They are more generous to the receiving party than ordinary party party costs.
A court orders indemnity costs only in particular circumstances, such as where a party has rejected a reasonable settlement offer or has conducted the litigation unreasonably.
How Does the Calculation Differ Between the Two Bases?
For solicitor client costs, a compliant costs agreement is prima facie evidence that the costs disclosed in it are fair and reasonable.
For party party costs, the assessment is not bound by the successful party’s costs agreement. Costs that a client is properly liable to pay to their own lawyer may be disallowed or reduced when claimed against the other side. This is why the two figures rarely match.
The table below sets out the key differences at a glance:
|
Feature |
Party/party costs |
Solicitor/client costs |
|
Who pays |
The opposing party under a court order |
The client to their own law practice |
|
Source of obligation |
A costs order or rule of court |
The retainer between client and lawyer |
|
Scope of recovery |
Partial, objectively assessed |
Full agreed costs, subject to fair and reasonable test |
|
Governing test (NSW) |
Fair and reasonable, ordered costs basis |
Fair and reasonable, applying the costs agreement |
In Which Circumstances Does Each Basis Apply?
Solicitor client costs apply in every retainer. When you engage a law practice, you are responsible for solicitor client costs for the work done on your matter.
Party party costs arise in litigated matters. They apply where a court or tribunal makes a costs order, or where parties agree to pay costs as part of a settlement. The successful party then becomes entitled to recover a contribution towards their costs from the other side.
Party party costs orders are common in civil litigation, but they are rare in some areas. In family law matters and work injury damages claims, for example, each party usually bears their own costs. A costs order against the other party is the exception rather than the rule.
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A client pays solicitor client costs to their own lawyer throughout the matter.
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If they succeed and obtain a costs order, they may then recover party party costs from the opposing party.
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The party party costs partially reimburse what the client has paid their own solicitor.
The shortfall between the two is sometimes called the gap.
How Does a Costs Assessor Approach Each Basis on Assessment?
On a solicitor client assessment, the assessor examines the bill rendered by the law practice to its own client. They consider whether those costs are fair and reasonable, having regard to the factors set out in section 172 of the Uniform Law.
On a party party assessment, the assessor determines what the paying party should reasonably contribute. This involves scrutinising:
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whether each item was reasonably incurred for the conduct of the litigation, and
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whether the amount is fair and reasonable for the work performed.
Items that are properly chargeable to the client on a solicitor/client basis may nonetheless be reduced or disallowed against the opposing party. The assessor also applies the indemnity principle. This means a party cannot recover more from the other side than they are actually liable to pay their own lawyer.
Does the same process apply in Victoria and the Federal Court?
No. While NSW and Victoria share the Legal Profession Uniform Law, the process for costs assessment differs by jurisdiction:
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NSW An application is filed and an independent costs assessor, appointed by the Chief Justice, determines the fair and reasonable amount.
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Victoria the Costs Court, a division of the Supreme Court of Victoria, deals with assessment of costs.
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The High Court, the Federal Court and the Federal Circuit and Family Court of Australia have their own rules and processes for party party costs.
If your matter involves more than one jurisdiction, it is worth confirming which process applies before taking any step, because the procedures and time limits are not the same.
Speak to a Costs Specialist
Whether you have received a costs order or want to understand a bill from your own lawyer, the basis of the costs makes a significant difference to what you can recover or must pay.
Blue Ribbon Legal provides expert assessment of costs orders on both party party and solicitor client bases, helping individuals and law practices across NSW and Victoria understand and quantify their costs. Contact Blue Ribbon Legal to discuss your matter with an accredited specialist in costs law.
Frequently Asked Questions (FAQs)
Why don’t party party costs cover my entire legal bill?
Party party costs are intended to be a partial reimbursement, not a full indemnity. The assessor allows only those costs reasonably incurred for the litigation and reasonable in amount when measured against the paying party. Items you have properly paid your own lawyer may be reduced or disallowed against the other side.
Are solicitor client costs the same as indemnity costs?
No. Solicitor client costs describe what you owe your own lawyer. Indemnity costs are party/party costs that are more generous than ordinary or standard party/party costs
Can I have both kinds of costs in the same matter?
Yes. You will incur solicitor client costs payable to your own lawyer throughout the matter. If you succeed and obtain a costs order, you may also recover party party costs from the opposing party. The party party recovery does not fully cover solicitor client costs.
How do I find out what I can actually recover?
The most reliable way is to have a costs specialist review your matter and prepare or assess a bill of costs.