Personal Costs Orders Against Solicitors in Australia

Personal Costs Orders Against Solicitors

In Australian civil litigation, the general rule is that costs follow the event. The unsuccessful party will ordinarily be required to pay the successful party’s legal costs.

This principle holds that a litigant who is forced to resort to the courts to vindicate their rights should not be financially disadvantaged merely because the commercial litigation was necessary.

The Court’s Discretion Over Costs

Although this rule is well established, courts retain a broad discretion when determining costs. That discretion allows courts to depart from the ordinary position where the circumstances of a case require it.

In Latoudis v Casey (1990) HCA 59, the High Court explained that the discretion must be exercised according to the circumstances of the particular case so as to achieve what is fair and just between the parties, as stated at [6]:

The discretion is one to be exercised in each case according to its own circumstances… it must be exercised judicially so as to achieve what is fair and just between the parties according to the circumstances of the particular case.

The purpose of costs orders also shapes the way in which that discretion is exercised. Costs are not imposed to punish a losing party but to compensate the successful party for the expense of litigation (including debt recovery proceedings).

As the High Court observed in Oshlack v Richmond River Council [1998] HCA 11, the object of a costs order is to indemnify the successful litigant rather than penalise the unsuccessful one, as stated at [1]:

Costs are awarded to indemnify a successful party in litigation, not by way of punishment of an unsuccessful party.

The Exceptional Nature of Personal Costs Orders

Against that background, orders requiring legal practitioners personally to pay costs represent a significant departure from the ordinary approach to costs. Courts, therefore, treat such orders as exceptional.

The mere fact that a case fails, or that an argument proves unpersuasive, will not expose a lawyer to personal liability.

This caution reflects the role lawyers occupy within the adversarial system. Advocates must be able to present arguable cases on behalf of their clients without fear that an adverse outcome will result in personal financial consequences.

As the Queensland Court of Appeal observed in Steindl Nominees Pty Ltd v Laghaifar [2003] QCA 157, it is not sufficient that a court considers an advocate to have argued a weak or even hopeless case. Something more is required before personal liability will arise, as stated at [41]:

So it is not enough that the court considers that the advocate has been arguing a hopeless case… The litigant is entitled to be heard; to penalise the advocate for presenting his client’s case to the court would be contrary to the constitutional principles… The position is different if the court concludes that there has been improper time-wasting by the advocate or the advocate has knowingly lent himself to an abuse of process.

Duties Owed by Lawyers to the Court

The possibility of personal costs orders arises because lawyers owe duties not only to their clients but also to the court and the administration of justice.

Those duties require practitioners to exercise independent judgment in determining how litigation should be conducted.

Where proceedings are pursued despite having no real prospects of success, or where the court’s procedures are misused for collateral purposes, the court may intervene.

The Federal Court discussed the circumstances in which this jurisdiction may arise in White Industries (Qld) Pty Ltd v Flower & Hart (a firm) [1998] FCA 806.

Goldberg J explained that personal costs orders may be justified where lawyers initiate or continue proceedings that lack any substantial prospect of success, or where they otherwise engage in serious misconduct in the conduct of litigation.

The jurisdiction to order costs against an unsuccessful party’s solicitors is enlivened when they have unreasonably initiated or continued an action when it had no or substantially no prospects of success… or to a serious dereliction of duty or serious misconduct in promoting the cause of and the proper administration of justice.

The Court’s Power to Order Costs Against Solicitors Personally

The authority of Australian courts to order costs against solicitors personally derives primarily from the statutory powers governing costs.

In the Federal Court, that jurisdiction is principally found in s 43 of the Federal Court of Australia Act 1976, which confers a broad discretion to award costs in proceedings before the Court.

In White Industries (Qld) Pty Ltd v Flower & Hart (a firm) [1998] FCA 806, the Federal Court explained that this statutory discretion is not confined to litigants themselves but may extend to those responsible for the conduct of litigation.

The Court’s primary jurisdiction to award costs is found in s 43 of the Federal Court of Australia Act (Cth)… This section confers jurisdiction on the Court to award costs not only against parties to proceedings but also against persons who are not parties to proceedings.

The significance of this passage lies in its recognition that the costs jurisdiction is directed at responsibility rather than formal party status.

While costs orders ordinarily fall upon the parties to a proceeding, the statutory framework allows courts to look beyond that structure where the circumstances justify it.

If the conduct of litigation by legal practitioners has caused unnecessary expense or misuse of the court’s procedures, the Court’s jurisdiction is sufficiently broad to address that conduct directly.

The Span of the Federal Court’s Costs Power

The scope of the Court’s costs jurisdiction was examined in detail by the Full Court in Caboolture Park Shopping Centre Pty Ltd (In Liquidation) and White Industries (Qld) Pty Ltd v Flower and Hart (A Firm) [1993] FCA 471.

The case arose after a successful litigant sought to pursue a costs order directly against the solicitors who had conducted the unsuccessful litigation.

In addressing whether the Court possessed jurisdiction to entertain such an application, the Full Court emphasised the breadth of the statutory powers conferred by the Act.

In particular, the Court rejected the suggestion that the costs jurisdiction ceased once judgment had been entered in the substantive proceeding, as stated at [30]:

The context of the Act provides no indication that the words defining the grant of jurisdiction in s 43… have a temporal meaning which limits the jurisdiction conferred to a jurisdiction which terminates when a judgment has been pronounced.

The Court explained that the statutory framework was designed to give the Federal Court sufficiently wide powers to address controversies arising from litigation and the conduct of those involved in it.

As the Full Court observed when discussing the related provisions of the Act, the intention of Parliament was to ensure that the Court could exercise its jurisdiction with the widest possible powers, as stated at [32]:

There is nothing in ss 22 or 23 of the Act to indicate an intention of the Parliament to circumscribe the power of the Federal Court… the terms of s 22… contemplate the Court exercising its jurisdiction with the benefit of the widest of powers.

These observations confirm that the costs jurisdiction operates as part of the Court’s broader authority to ensure that litigation before it is conducted properly and efficiently.

The power to make orders against solicitors personally, therefore, arises not from any special statutory provision directed solely at lawyers, but from the general breadth of the Court’s costs powers.

Supervisory Jurisdiction Over Legal Practitioners

The availability of personal costs orders is also linked to the supervisory role courts exercise over legal practitioners appearing before them.

Lawyers do not merely represent private interests; they participate in a system designed to administer justice according to law.

As a result, courts retain the authority to respond when practitioners’ conduct undermines that process.

This supervisory role was addressed directly in Caboolture Park Shopping Centre Pty Ltd (In Liquidation) and White Industries (Qld) Pty Ltd v Flower and Hart (A Firm) [1993] FCA 471, where the Court rejected a submission that legal practitioners owed no enforceable duty to the Federal Court, as stated at [38]:

The underlying principle is that the Court has a right and a duty to supervise the conduct of its solicitors, and visit with penalties any conduct of a solicitor which is of such a nature as to tend to defeat justice in the very cause of which he is engaged professionally.

The importance of this statement lies in its articulation of the relationship between the courts and legal practitioners.

The supervisory jurisdiction of courts exists not merely to discipline lawyers but to protect the integrity of the judicial process itself. When litigation conduct threatens to undermine that process, courts possess the authority to intervene.

Caution in the Exercise of the Jurisdiction

Despite the breadth of these powers, courts consistently emphasise that personal costs orders against lawyers should be made cautiously.

The jurisdiction is not designed to penalise advocates merely because the case they present ultimately fails.

The High Court made this point clear in Levick v Deputy Commissioner of Taxation [2000] FCA 674, where the Court considered an order requiring a solicitor to pay costs personally following the advancement of untenable arguments in bankruptcy proceedings.

In discussing the nature of the jurisdiction, the Court stressed that such orders must be approached with restraint, as stated at [16]:

The jurisdiction is, I think, one that must be exercised sparingly… Should it turn out that the litigation is decided adversely to the litigant it does not follow that costs should, in consequence, be ordered against the legal adviser.

This caution reflects the fundamental role lawyers play in the adversarial system. Advocates must be able to advance arguable cases without fear that personal liability will follow simply because a court ultimately rejects those arguments.

The existence of the jurisdiction is therefore not controversial. The more difficult question lies in determining when it should be exercised.

Next, we will examine the circumstances in which courts have concluded that the conduct of legal practitioners justifies the exceptional step of ordering them to pay costs personally.

When Will Courts Order Solicitors to Pay Costs?

Although courts possess the jurisdiction to order costs against solicitors personally, the circumstances in which that jurisdiction will be exercised are relatively limited.

The existence of the power does not mean it will be routinely invoked.

Courts consistently emphasise that the threshold is high and that the conduct in question must involve more than merely advancing a case that ultimately fails.

Instead, personal costs orders are generally associated with identifiable categories of litigation misconduct.

These include commencing or continuing proceedings that have no real prospect of success, advancing arguments that are plainly untenable, or using court processes for collateral purposes.

Each of these categories reflects a situation where the conduct of legal representatives undermines the proper administration of justice.

Proceedings With No Real Prospect of Success

One of the most cited grounds for personal costs liability arises where legal practitioners commence or continue proceedings that lack any genuine prospect of success.

Lawyers are expected to exercise independent professional judgment when evaluating the merits of a claim before pursuing it through litigation.

Where a claim is plainly unsustainable, the decision to continue advancing it may expose the practitioner to personal liability for costs.

The Queensland Court of Appeal addressed this issue in Steindl Nominees Pty Ltd v Laghaifar [2003] QCA 157. In that case the Court considered whether counsel should personally bear costs arising from litigation that ultimately proved unsuccessful.

While the Court declined to make such an order on the facts, it articulated the principle governing the assessment of arguability:

Greater care must be taken, in judging the conduct of a lawyer for a party in litigation, where the arguability of that party’s case depends on a question of fact than where it depends on a question of law… Nevertheless the question, in my opinion, is the same whether it depends on fact or law. If the case is plainly unarguable it is improper to argue it.

The Court’s reasoning highlights an important distinction. Lawyers are not required to guarantee that their client’s case will succeed.

Litigation often involves disputed evidence or uncertain legal questions. However, where a claim is plainly unarguable, continuing to pursue it may fall outside the boundaries of legitimate advocacy.

Improper Purpose and Abuse of Process

Personal costs orders may also arise where proceedings are commenced or maintained for purposes unrelated to the legitimate resolution of legal disputes.

Courts have long recognised that the judicial process must not be used as a strategic tool for collateral objectives such as delay, pressure, or harassment.

A prominent example appears in White Industries (Qld) Pty Ltd v Flower & Hart (a firm) [1998] FCA 806.

In that case, the Federal Court examined the conduct of solicitors who had commenced proceedings containing allegations of fraud despite the absence of any factual basis for those allegations, as stated:

Flower & Hart instituted a proceeding on behalf of its client alleging fraud when there was no factual basis for that allegation and in respect of a cause of action which it believed could not be won.

The significance of this finding was not simply that the claim failed. Rather, the Court concluded that the proceedings had been initiated despite the absence of any proper evidentiary foundation. Such conduct raised serious concerns about the use of court processes and the responsibilities of lawyers who initiate litigation.

In circumstances where proceedings are pursued for collateral purposes or without any factual foundation, the ordinary allocation of costs between the parties may be insufficient to address the resulting misuse of the court’s processes.

Personal costs orders therefore operate as a mechanism through which courts may respond directly to the conduct of those responsible for initiating or maintaining such proceedings.

Advancing False or Indefensible Arguments

Another situation in which personal costs orders may arise involves advancing arguments that are plainly untenable. Lawyers are expected to exercise professional judgment when determining which legal arguments can properly be advanced before a court. Where arguments lack any plausible legal basis, the decision to pursue them may justify the imposition of costs against the practitioner responsible.

The Federal Court addressed this issue in Levick v Deputy Commissioner of Taxation [2000] FCA 674.

The case involved bankruptcy proceedings in which a solicitor advanced a series of constitutional arguments that the Court ultimately regarded as entirely lacking in merit.

In discussing the origin of those arguments, the Court observed that the responsibility lay with the legal representatives rather than the client, as stated at [19]:

It is not as if these arguments would have originated from the client. They clearly originated with the lawyers… There is, as well, an ethical question which arises where solicitor or counsel advise their clients to pursue spurious arguments before the Courts.

The Court’s reasoning illustrates the relationship between professional responsibility and litigation strategy.

Where lawyers themselves devise arguments that lack any arguable legal foundation, the consequences of that decision may extend beyond the outcome of the case itself.

Real-World Examples of Personal Cost Orders Against Lawyers

The courts have repeatedly demonstrated a willingness to impose personal costs on practitioners who persist with proceedings that lack any proper foundation.

A clear example arises in Steindl Nominees Pty Ltd v Laghaifar [2003] QCA 157, where the Court of Appeal considered whether counsel should bear costs personally after pursuing a baseless application.

The Court found that the application advanced unsupported arguments and, in some respects, bordered on allegations of dishonesty without a proper basis.

In assessing the conduct, the Court emphasised that the persistence of such claims could justify a departure from the ordinary rule that costs follow the event.

At [2–3], the Court highlighted the procedural context in which the personal costs issue arose, noting that the application for costs against counsel was sufficiently serious to require separate consideration:

In that application Steindl had also sought an order for costs against Wrenn personally, also on an indemnity basis… this Court made orders that any further evidence or submissions with respect to this question be furnished… indicating that it would give judgment without hearing further oral argument.

While the ultimate order did not impose personal liability in that instance, the case illustrates the circumstances in which such orders are considered, particularly when counsel advances claims lacking evidentiary support or persists in arguments that cannot properly be maintained.

Acting Without Reasonable Prospects of Success

A more direct illustration of the threshold for personal costs liability is found in Lemoto v Able Technical Pty Ltd & 2 Ors [2005] NSWCA 153.

The case concerned a solicitor against whom a personal costs order had been made on the basis that the proceedings were pursued without reasonable prospects of success.

The Court of Appeal clarified that the jurisdiction is intended to deter practitioners from advancing untenable claims.

At [1], the Court explained the purpose of the statutory regime:

The purpose of Part 11, Division 5C … is to deter the legal practitioner at the peril of a personal costs order … from representing a client whose prospects… have no reasonable prospects of success.

However, the Court ultimately set aside the order, emphasising that the threshold had not been properly met. In doing so, it reinforced that the jurisdiction is not triggered lightly, and that practitioners are entitled to advance claims that remain arguable.

The decision, therefore, serves as a practical example of both sides of the principle: it demonstrates when courts will consider imposing personal costs, while also illustrating the limits of that power.

Procedural Unfairness and the Setting Aside of Cost Orders

Importantly, Lemoto v Able Technical Pty Ltd & 2 Ors [2005] NSWCA 153 also shows that even where a court is concerned about a practitioner’s conduct, procedural fairness remains a critical constraint on the exercise of the jurisdiction.

At [10], the Court stressed that a practitioner must be given a proper opportunity to respond before any personal costs order is made:

The Court must ensure that the legal practitioner… has full and sufficient notice of the complaint and full and sufficient opportunity of answering it.

The failure to afford such an opportunity was one of the central reasons the costs order was overturned. This highlights that the jurisdiction is not only substantively demanding but also procedurally rigorous.

Discretionary Costs, Consequences, and Litigation Conduct

The broader discretionary nature of costs powers is also reflected in cases such as Hamod v State of New South Wales and Anor [2011] NSWCA 375. While not a direct wasted costs case, the decision illustrates the court’s approach to costs as a tool for controlling litigation conduct.

In that case, the Court upheld a gross sum costs order, confirming that such orders may be appropriate where traditional assessment processes would be inefficient or unjust. As noted at the headnote:

His Honour correctly exercised his power to make an order for specified gross sum costs instead of assessed costs.

This reflects a broader principle: courts retain flexibility to shape costs orders in response to the realities of the litigation, including the conduct of the parties and their representatives.

The Limits of Court Intervention

Taken together, these cases demonstrate that personal costs orders against lawyers are not routine but arise in identifiable categories of misconduct.

These include pursuing claims without reasonable prospects, advancing arguments without evidentiary foundation, and engaging in litigation conduct that departs from professional standards.

At the same time, the authorities make clear that the jurisdiction is tightly controlled. Courts remain cautious to ensure that such orders do not discourage legitimate advocacy or penalise practitioners for advancing arguable, albeit unsuccessful, cases.

The result is a balanced framework, one that preserves the integrity of the litigation process while recognising the central role of lawyers in testing the boundaries of the law.

Personal Costs Orders Against Solicitors – Key Takeaways

The authorities considered throughout this article reveal a consistent and tightly controlled approach to personal costs orders against legal practitioners.

The jurisdiction is neither punitive nor routine. Instead, it is engaged only where a practitioner’s conduct departs in a meaningful way from acceptable professional standards.

Three core principles emerge. First, the threshold is high. Courts will not intervene merely because a case fails; there must be something more, whether that be a lack of reasonable prospects, the advancement of untenable arguments, or conduct that amounts to an abuse of process.

Secondly, the inquiry is contextual. The court evaluates the practitioner’s conduct at the time decisions were made, not with the benefit of hindsight.

Thirdly, the jurisdiction is fundamentally discretionary, requiring an assessment of whether it is just, in all the circumstances, to impose personal liability.

Practical Implications – Personal Costs Orders Against Solicitors

From a practical perspective, the cases highlight several clear risk areas for legal practitioners.

The most significant is the continued pursuit of claims that lack a proper evidentiary or legal foundation.

While practitioners are entitled to advance arguments that are novel or uncertain, there is a critical distinction between an arguable case and one that is objectively untenable.

The failure to recognise that distinction exposes practitioners to personal costs consequences.

Equally important is the way litigation is conducted. Allegations, particularly serious ones such as dishonesty, must be grounded in evidence.

The advancement of claims or submissions without a proper factual basis not only undermines the integrity of the proceeding but may also justify personal liability.

Practitioners must also remain alert to their ongoing obligations as proceedings evolve. A case that may have been arguable at commencement can, over time, lose its foundation.

The authorities make clear that the obligation to reassess the merits of a case is continuous, and that persistence in the face of clear deficiencies may attract sanction.

Quick Reference Table

The table below provides a high-level snapshot of when courts may consider making a personal costs order against a solicitor.

It distils the key thresholds identified in the authorities into a practical framework, separating acceptable litigation risk from conduct that may attract judicial intervention.

While each case turns on its own facts, the categories below reflect the spectrum applied by courts when assessing whether a practitioner’s conduct has crossed the line from legitimate advocacy into unreasonable or improper conduct.

The Court’s Balancing Exercise

Ultimately, the jurisprudence reflects a careful balancing exercise. On one hand, courts must safeguard the integrity of the litigation process and protect parties from the costs of baseless or improperly conducted proceedings.

On the other hand, they must avoid discouraging legitimate advocacy or deterring practitioners from advancing arguable cases on behalf of their clients.

The result is a jurisdiction that is both principled and restrained. Personal costs orders remain a powerful tool, but are deployed sparingly and only where clearly justified.

For practitioners, the message is not to avoid risk, but to ensure that risk is grounded in reasoned judgement, supported by evidence, and consistent with professional obligations.

Personal Costs Orders Against Solicitors – Frequently Asked Questions

The law surrounding personal costs orders against lawyers is technical, and often misunderstood.

The following FAQs distil the key principles from the authorities into clear, practical answers, focusing on when courts will intervene, the threshold that must be met, and the steps practitioners can take to avoid personal liability.

While the jurisdiction is exercised sparingly, it carries serious consequences, making a proper understanding of the boundaries of acceptable litigation conduct essential for any solicitor practising in Australian courts.

Can a lawyer be ordered to personally pay legal costs in Australia?

Yes. Courts in Australia have the power to order a lawyer to personally pay costs in limited circumstances. This usually occurs where the lawyer has acted improperly, unreasonably, or without reasonable prospects of success. However, the threshold is high, and such orders are not made lightly. The court will consider whether, in all the circumstances, it is just to impose personal liability.

What is a personal costs order?

A personal costs order (sometimes called a wasted costs order) requires a lawyer to pay some or all of the legal costs of proceedings out of their own pocket. This departs from the usual rule that the client is responsible for costs. It is typically made where the lawyer’s conduct has caused unnecessary expense or has fallen below acceptable professional standards.

When will a court order a lawyer to pay costs personally?

Courts may make such orders where a lawyer pursues a case with no reasonable prospects of success, advances arguments without evidence, or engages in improper conduct. The conduct must go beyond mere negligence or error. The court will assess whether the lawyer’s actions caused unnecessary costs and whether it is fair to impose personal liability.

Can a lawyer be penalised for losing a case?

No. Simply losing a case does not expose a lawyer to personal costs. Courts recognise that litigation involves risk and that lawyers are entitled to run arguable cases, even if unsuccessful. A personal costs order will only be considered where the case was not reasonably arguable or where the lawyer’s conduct was improper or unreasonable.

What does “no reasonable prospects of success” mean?

This means that, based on the available evidence and law, the case was not fairly arguable. It is not enough that the case was weak or ultimately failed. The test is whether a competent lawyer could reasonably justify pursuing the claim or defence at the time. If not, continuing the case may expose the lawyer to personal costs.

Are personal costs orders common in Australia?

No. Personal costs orders against lawyers are relatively rare. Courts are cautious when exercising this power because of its serious consequences. The jurisdiction is used sparingly and only in clear cases of misconduct or unreasonably pursued litigation. Most unsuccessful cases do not result in any personal liability for the lawyer involved.

Can a lawyer be ordered to pay costs for making false allegations?

Yes. If a lawyer advances serious allegations—such as fraud or dishonesty—without proper evidence, the court may consider a personal costs order. Such conduct can be seen as an abuse of process or a breach of professional obligations. Lawyers must ensure that any serious allegations are properly supported before including them in pleadings or submissions.

Do lawyers get a chance to respond before a costs order is made?

Yes. Procedural fairness is essential. A lawyer must be given notice that a personal costs order is being considered and a reasonable opportunity to respond. If the court fails to provide this opportunity, the order may be overturned on appeal. This ensures that the process is fair and that lawyers can defend their conduct.

Can a lawyer be liable for costs if their client insists on continuing a weak case?

Potentially, yes. While lawyers act on instructions, they still have an independent duty to the court. If a case becomes clearly unarguable, a lawyer must advise the client accordingly and may need to cease acting. Continuing purely on client instructions, without a reasonable basis, can expose the lawyer to personal costs liability.

How can lawyers avoid personal costs orders?

Lawyers can minimise risk by ensuring all claims and arguments are properly supported by evidence and law, regularly reassessing the merits of a case, and avoiding exaggerated or unsupported allegations. Maintaining clear advice to clients about risks and prospects is also critical. Ultimately, acting reasonably, ethically, and in accordance with professional standards is the best protection.