A Gross Sum Costs Order is when the Court estimates costs against a party in litigation. This avoids a cost assessment, which is often costly and lengthy.
When will a Court use a Gross Sum Order?
Courts will use a gross sum order on two occasions. The first is when the Court decides on it, and the second is when a party applies for it. Depending on whether the litigation is in the federal or state court, the Court will have different restrictions in using a Gross Sum Order. Generally, in state courts, a Gross Sum Order is strictly applied. On the other hand, federal courts are less restricted and in fact, are encouraged to use the order.
State courts
Most states have legislation outlining the Court’s power to use Gross Sum Orders. For example, in NSW, the relevant provision is section 98(4) of the Civil Procedure Act 2005 (NSW). This provision empowers the court to make a Gross Sum Order at any time before a costs assessment has begun. Before such an order, state courts must consider if it is reasonable to do so.
What is reasonable mean?
There is no clear definition of what reasonable means. However, there are situations where it most likely will be applied. The table below lists them.
| Example | Scenario |
| When litigation has been long and costly, further costs from cost assessment is unreasonable. | Complicated commercial cases with multiple issues. For example, a dispute between two public companies, as to the existence of an implied contractual term in a multi-billion dollar deal. |
| For cases that are simple, and which the Court has little trouble estimating costs. | Cases that are short and simple. Ones that do not involve millions of dollars. Cases with only one or two issues. For example, a simple contract dispute between two individuals for the sale of a secondhand car. |
| When the case already includes substantial arguments around party costs. A further examination of costs is unneeded and will only complicate matters. | For cases that finish quickly, but draw out the matter of costs. For example, an obvious breach of contract, which is decided quickly. The losing party argues that litigation was unnecessary, as it was eventually going to compensate the winning party for the breach. Therefore, the argument before the court is not about the breach, but more about who pays the costs. The Court hears and considers the matter, then uses Gross Sum Order accordingly. |
| The winning party would be negatively affected by the cost assessments process. In addition to this, the losing party would likely be unable to pay the assessed amount. | For complicated cases with smaller or financially limited parties. For example, a small retailer is suing distributor for failure to deliver products. The distributor is in debt. Neither party is in a position to pay party costs. |
| The behaviour of the party paying costs has contributed predominantly to the costs. | When a party runs multiple interlocutory proceedings and argues every little point. This may be a tactic to bleed the other party dry, forcing it to settle. |
| Losing party does not follow the Court’s orders. | If the losing party does not follow the Court’s orders, then this causes substantial costs to the other party. Therefore, the Court can order a Gross Sum Order to hold the losing party responsible. |
Although this table lists common scenarios when a state court judge will use a Gross Sum Order, you will need to seek legal advice for a deeper understanding.
Federal courts
These judges have far more discretion when using Gross Sum Orders. They prefer to use Gross Sum Orders when possible. Depending on the complexity of the case, will depend on when the parties will have a chance to oppose the use of a Gross Sum Order for determining costs.
- Short and simple cases–both parties must argue against the use of a Gross Sum Order during closing submissions at trial.
- Long and complex cases–parties will have 6 weeks following the conclusion of the case to prepare for arguments relating to cost
Although Gross Cost Orders are more straightforward than cost assessment orders, the judge does not decide the costs randomly. He or she still have regard to various factors, including possible discounts for the losing party for avoiding pricey assessment costs. To find out if a Gross Sum Order is something you either want or want to avoid, you need to be advised by a civil litigation lawyer.
Want to know more? Contact a LawPath consultant on 1800 529 728 to learn more about Gross Sum Costs Orders and to obtain a fixed-fee quote from Australia’s largest legal marketplace.
