Alex is Sprintlaw’s co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
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Legal issues aren’t anyone’s favourite part of running a small business. But at some point, you may need to engage a lawyer - to draft a key contract, resolve a dispute, or defend a claim.
When that happens, two questions usually come up fast: how much will it cost, and can you recover those costs from the other side if you win?
This is where the concept of solicitor client costs comes in. Understanding the basics will help you budget, negotiate better contracts, and make strategic decisions about disputes.
In this guide, we’ll explain solicitor client costs in plain English, when courts may order them, how your contracts can improve your chances of recovering legal costs, and practical ways to manage your legal spend without nasty surprises.
What Are Solicitor Client Costs?
Solicitor client costs are the legal fees and disbursements you pay to your own lawyer. Think of it as the full bill for professional work done on your matter - advice, drafting, correspondence, negotiations, court filings, counsel’s fees, experts, and out‑of‑pocket expenses (filing fees, barrister fees, document service, etc.).
In Australian litigation, there are a few different “bases” for costs:
- Party/party costs: If you obtain a standard costs order after winning a case, the losing party usually pays a portion of your costs on a “party/party” basis. This is not full reimbursement - it typically covers only reasonably necessary steps at court‑scale rates.
- Solicitor/client costs: This refers to the full amount you owe your own lawyer under your costs agreement. In some contexts (including certain court orders or contractual rights), the other side may be required to pay on a solicitor/client basis, which can be closer to full indemnity.
- Indemnity costs: A higher, more generous basis of assessment. If a court orders indemnity costs (often because of unreasonable conduct by the other side or a rejected settlement offer), you may recover a larger share of what you actually spent. In practice, solicitor/client and indemnity are both more generous than party/party, but the exact outcome depends on the jurisdiction and assessment.
Key point: your solicitor client costs are what you owe your lawyer. Whether you can recover those costs from someone else depends on a costs order, a contractual right, or a settlement.
How Do Solicitors Charge (And What Affects The Bill)?
Lawyers in Australia must give you a costs disclosure and a costs agreement (or solicitor/client agreement) that explains how they charge. Common fee models include:
- Hourly rates: You’re billed for time spent by the team, plus disbursements. Rates vary by seniority and complexity.
- Fixed fees: A set price for a defined scope (e.g. drafting a contract, reviewing a policy, or preparing a simple demand letter).
- Capped fees: Time‑based billing up to an agreed ceiling.
- Staged fees: Pricing by milestones (e.g. pre‑action, pleadings, mediation, trial prep).
Your final costs will be influenced by scope, urgency, the other side’s behaviour (e.g. if they dump documents or run every point), the need for counsel or experts, court timetables, and how efficiently instructions and documents are handled.
It’s reasonable to ask for a written scope, an estimate, and regular updates. If the scope changes, your lawyer should flag that early and seek your approval before incurring significant additional costs.
When Do Courts Order Solicitor Client Costs?
Courts have discretion about costs. The usual rule is that the unsuccessful party pays the successful party’s costs on a party/party basis. However, a court may order a more generous basis - solicitor/client or indemnity costs - in certain situations. Examples include:
- Contractual right to full costs: If your contract says the defaulting party must pay your legal costs on a solicitor/client or indemnity basis, courts often give effect to that bargain (subject to reasonableness).
- Unreasonable conduct: Serious misconduct, abuse of process, or clear unreasonableness can justify indemnity costs.
- Rejected settlement offers: If you made a genuine offer of compromise or a strong “Calderbank” offer and the other side unreasonably refused, a court may award indemnity costs from the date of the offer.
- Specific rules or legislation: Some statutes and court rules allow elevated costs orders in defined circumstances.
Even with a favourable order, recovery is rarely 100%. Costs are assessed - the court (or costs assessor) determines what’s reasonable and necessary. It’s better coverage than party/party, but you should still budget conservatively.
Can Your Contract Help You Recover Legal Costs?
Yes - smart contract drafting can significantly improve your prospects of recovering legal spend if a dispute arises. Key clauses to consider:
Costs And Indemnity Clauses
Include a provision that, if the other party breaches the agreement, they must pay your reasonable legal costs on a solicitor/client or indemnity basis. This sets expectations and gives you a contractual hook when seeking a costs order or negotiating settlement.
Limitation Of Liability And Risk Allocation
Balance your position with a clear limitation of liability aligned to your risk appetite and insurance. A well‑structured liability framework complements your cost recovery strategy - you’re limiting exposure on one hand and preserving recovery rights on the other.
Set-Off And Payment Security
Where commercial and appropriate, a set‑off clause can allow you to set unpaid sums against amounts you owe the counterparty. While set‑off doesn’t replace a costs order, it can be a practical tool when resolving cross‑claims and negotiating who pays costs.
Guarantees And Indemnities
If you’re contracting with a company with limited assets or a new venture, consider requiring a director or parent entity to guarantee obligations (including legal costs). A tailored Deed of Guarantee and Indemnity can protect you if the customer entity can’t pay.
Terms Of Trade And Enforcement Pathways
Your standard terms should set out payment obligations, default interest, collection costs, and dispute pathways. Clear, well‑drafted Terms of Trade can reduce disputes and place you in a stronger position to recover outstanding amounts and associated legal fees.
Using Deeds To Finalise Settlements
When a dispute resolves, record it in a deed with a crystal‑clear costs position. A properly drafted settlement deed can deal with releases, payment schedules, tax, confidentiality, and who pays what on costs. Many businesses use a Deed of Settlement or a broader deed format to lock in finality and avoid new arguments after the handshake.
How To Manage And Budget For Solicitor Client Costs
You can’t eliminate legal costs, but you can control them. These practical steps help small businesses get value and reduce surprises:
1) Start With A Clear Scope And Budget
- Ask for a written scope and fee model that matches your risk. For disputes, consider staged scopes (pre‑action letter, negotiations, mediation, pleadings, etc.).
- Request a realistic estimate and assumptions. Agree on what triggers a budget review.
- Set communication preferences - e.g. weekly cost updates or a spend threshold for approvals.
2) Choose Fee Structures That Fit The Task
- Use fixed fees or caps for discrete pieces (document drafting, initial advice, short hearings) where possible.
- Reserve hourly rates for fluid or complex work that’s hard to predict, but consider caps per stage.
- Discuss when counsel or experts will be briefed and the expected range of their fees.
3) Be An Efficient Instructing Client
- Nominate a single point of contact in your business.
- Provide a clean, chronological brief with key contracts, correspondence, and evidence up front.
- Answer queries promptly and avoid scope creep; clarify priorities and your commercial red lines early.
4) Use Early Resolution Tools
- Consider a strategic demand letter and without‑prejudice negotiations.
- Explore ADR (mediation) early - it can save months of time and cost.
- If settlement is feasible, record terms quickly and properly in a Deed of Release and Settlement, including the agreed position on legal costs.
5) Triage Disputes Commercially
- Be honest about collectability. A costs order is only as good as the payer’s solvency.
- Run a simple cost‑benefit analysis for each step. Spend where it moves the dial; avoid point‑scoring correspondence.
- Use contractual levers (e.g. suspension rights, interest) alongside legal strategy to encourage resolution.
6) Keep Good Records
- Retain invoices, file notes, offer letters, and mediation statements - they’re useful in costs negotiations and, if needed, assessment.
- Track internal time and losses. This won’t always be recoverable, but it helps quantify commercial impact when negotiating global settlements.
What Happens If A Legal Bill Feels Too High?
First, talk to your lawyer. Often, concerns arise from a misunderstanding about scope, a surge caused by a deadline, or disbursements landing in the same billing period. Ask for clarification, a time narrative, or to walk through the key drivers.
You also have rights under your state or territory’s legal profession laws. While the exact steps and time limits vary by jurisdiction, in many cases you can:
- Request an itemised bill if you received a lump‑sum bill (usually within a set period from receiving it).
- Seek a costs assessment or review through the relevant court or legal regulator if you believe fees are excessive or not in line with the costs agreement.
- Make a complaint to the Legal Services Commissioner or equivalent about costs or conduct issues.
If you’re unhappy with a bill, act promptly. There are strict timelines to request itemisation or assessment. Your costs agreement and disclosure documents will also outline dispute pathways - keep them handy.
Strategy Tip: Use Legal Costs As A Lever In Disputes
Costs are a powerful part of your negotiation toolkit. Consider these tactics with your lawyer:
- Early offers: Make a sensible without‑prejudice offer that addresses both the claim and costs. If it’s reasonable and refused, you may later seek indemnity costs from the offer date.
- Contractual reliance: Where your contract includes an indemnity or solicitor/client costs clause, highlight it early to set expectations.
- Target the real decision‑makers: If you have a guarantee, remind the guarantor of their exposure (including costs). A well‑drafted Deed of Guarantee and Indemnity can change the dynamic.
- Tidy pleadings and evidence: Being proportionate and focused improves your credibility with the court - and helps on costs assessment later.
Common Scenarios Where Solicitor Client Costs Come Up
1) Breach Of Contract Against A Customer Or Supplier
If your agreement includes an indemnity or solicitor/client costs clause and you win, you can ask the court to enforce that clause and award costs on the higher basis. Even without such a clause, you’ll usually seek party/party costs. For strategy and remedies, see this overview of breach of contract.
2) Settling Commercial Disputes
Most matters settle. Use the settlement to fix a clear costs position (e.g. “each party bears their own costs” or “the respondent pays $X inclusive of costs”). Don’t leave costs ambiguous. Formalise the deal in a Deed of Settlement so both sides can move on.
3) Contracting For Future Work
Refresh your standard Terms of Trade before large engagements. Consider adding (or tightening) your costs indemnity wording, late payment provisions, default interest, and jurisdiction/venue clauses. Solid front‑end drafting reduces back‑end legal spend.
4) Assignments, Novations Or Terminations
When contracts change hands or end, spell out who pays costs (yours and theirs) and how any disputes will be managed. If you’re documenting a change, ensure the instrument is fit‑for‑purpose - whether that’s an assignment, novation, or termination deed - and that the costs position is crystal clear. Where appropriate, use a deed structure and lean on your deed formalities for enforceability.
Frequently Asked Questions About Solicitor Client Costs
Are Solicitor Client Costs The Same As Indemnity Costs?
Not exactly. Both are more generous than party/party, but “solicitor/client” describes the full amount you owe your lawyer under your costs agreement, while “indemnity” is a court assessment standard that tends to allow a higher recovery of your reasonable spend. The effect can be similar, but terminology and assessment rules differ by jurisdiction.
If I Win, Will I Get All My Legal Costs Back?
Usually no. The default is party/party costs - partial reimbursement. You may get a higher order (solicitor/client or indemnity) if you have a contractual right, the other side acted unreasonably, or certain offer rules apply. Always budget on recovering less than you spend.
Can I Include Legal Costs In A Demand Letter?
Yes. If your contract allows recovery of legal costs or you’re seeking costs as part of resolving a dispute, you can include them in your demand and in any settlement discussion. Be prepared to justify the reasonableness of the amount.
Do I Need A Lawyer To Draft Costs Clauses?
It’s wise. Costs clauses interact with indemnities, liability caps, guarantees, and enforcement. A well‑balanced contract supports your commercial goals and reduces risk. If you’re refreshing key contracts, consider a contract review or targeted contract drafting to get it right.
Key Takeaways
- Solicitor client costs are the fees you owe your own lawyer; whether you recover them from the other side depends on court orders, contracts, or settlement.
- Courts usually award party/party costs, but may order solicitor/client or indemnity costs where contracts allow, settlement offers are unreasonably refused, or conduct justifies it.
- Stronger contracts improve cost recovery: consider costs indemnities, clear liability settings, set‑off, and, where appropriate, a guarantee.
- Proactive cost management - clear scope, suitable fee models, efficient instructions, and early ADR - keeps spend under control and supports better outcomes.
- If a bill feels high, seek clarification promptly and use your rights to request an itemised bill or costs assessment within the required timeframes.
- Always lock down the costs position in any settlement and record it properly in a Deed of Settlement or release deed.
If you’d like a consultation about solicitor client costs and how to structure your contracts and disputes strategy to manage legal spend, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.
