- A solicitor for an unsuccessful party to litigation can be ordered to pay costs if they conduct litigation unreasonably, incompetently, with serious neglect, or if they institute or maintain proceedings without reasonable prospects of success.
- To minimise the risk of personal liability for costs in unsuccessful litigation, lawyers should carefully scrutinise all evidence to ensure its relevance and inherent plausibility.
As claims against solicitors for personal costs orders have increased, it is important for practitioners to keep in mind the basis upon which these claims can be made, as well as the limited circumstances in which those orders will be made. Personal costs orders are primarily compensatory, but also form part of the Supreme Court’s inherent power to supervise the conduct of solicitors.
The courts have made it clear that the power to order costs be paid by a solicitor should be exercised judicially and only in exceptional cases (FMP Constructions Pty Ltd v Council of the City of Blue Mountains  NSWCA 340). Fair notice must be given to the practitioner against whom the order is being sought, and the decision must be determined by the delivery of a judgment which sets out the reasons for the outcome (Lemoto v Able Technical Pty Ltd & 2 Ors  NSWCA 153 (‘Lemoto’)).
The statutory provisions
Along with the Supreme Court’s inherent jurisdiction to order costs, clause 5(1) of schedule 2 of the Legal Profession Uniform Law Application Act 2014 (NSW) (‘LPULA’) provides that a law practice can be ordered to:
- repay the whole or part of any costs that their client has been ordered to pay another party; or
- to indemnify any other party for their costs paid, in whole or part, if it appears that they have provided legal services to a party without reasonable prospects of success.