Important Considerations Before Commencing Civil Litigation

Whether you have a strong case for breach of contract, defamation, or voidable transactions, there are a few important issues that must be considered before any civil litigation is commenced.

Costs

Usually, ‘costs follow the event’ which means the losing party is to pay the winning party’s costs. However, to the unfortunate realisation of most, this doesn’t mean that the losing party sends a big bag of cash to the other, in the amount of its entire fees. The reality is that even a successful litigant will be out of pocket for legal fees.

Costs are usually awarded on the standard basis, which is calculated according to the prescribed court scale of fees. Standard costs permit a recovery of approximately 50-65% of actual fees incurred, so all litigants should be aware that even if they are ultimately successful, they could still be out of pocket for half their legal costs.

Less frequently, costs can be awarded on the indemnity basis, which is calculated according to the costs agreement that exists between the winning litigant and its lawyers. Indemnity costs are awarded if a litigant has acted inappropriately throughout the proceeding (for instance, disregard for the law) and permit recovery of 75-90% of actual fees incurred. Even in these circumstances, successful litigants will be out of pocket a small portion of their legal fees.

Further, there are some areas of law that do not allow the recovery of costs, at all.

Enforcing judgement

At the end of the proceeding (which in some circumstances can take years) the court will give judgment to the winning litigant. However, although this piece of paper with the court’s seal may award you $100,000 plus costs (for example), it is worthless unless that judgment can be enforced on the losing party. 

Unless payment is forthcoming, common methods to enforce judgments include:

1. Bankruptcy proceedings – issue the losing litigant with a bankruptcy notice in the amount of the judgment. If it is not complied with within 21 days, they have performed an act of bankruptcy. If the bankruptcy proceedings are finalised, a trustee in bankruptcy will be appointed over the bankrupt estate’s to administer the assets to creditors;
2. Enforcement warrant – there are many types of enforcement warrants, with the most popular being seizure and sale of property. This involves placing a writ of execution over the litigant’s real property and engaging officers to seize and sell it. The proceeds can then be applied against the outstanding judgment.
3. Re-direction of earnings – you may wish to make an application to court, to order the losing party’s employer re-direct part of their wages to you until the judgment is paid-off. However, there are many factors the court will consider, such as the reasonable living expenses of the litigant.

Despite these (and many other) enforcement options open to all successful litigants, it may be that the losing party simply has no money or valuable assets, in which case enforcement will be unsuccessful. It is important therefore to consider whether it is worth commencing proceedings, if you will be unable to recover judgment (and costs) from the losing party. Fortunately, there are a number of searches that can be performed beforehand to assist with this decision.

If you are contemplating civil litigation, and would like to discuss costs or enforcement procedures before you commence, please contact our commercial litigation team on 4771 5664 or email law@connollysuthers.com.au