Declaration of interest: Daniel Creasey is also a Director of the Australian Pro Bono Centre. 

In brief - Amendments to Court's Rules provide for recovery of costs

The Victorian Supreme Court has amended its general civil procedure rules to specifically allow legal practitioners acting pro bono in successful matters to recover costs from unsuccessful parties. These amendments, which unequivocally support and reinforce the Court of Appeal's decision in Mainieri & Anor v Cirillo [2014] VSCA 227, are good news for those who have long advocated for reform in this area.

"Indemnity principle" not in conflict with conditional costs agreements in pro bono matters

In Australia, the "indemnity principle" is premised on a costs order compensating the successful party in litigation for the costs that party has incurred in prosecuting that matter. However, the principle operates only in circumstances where that successful party is obliged to pay the lawyer who acted for them. 

In the context of pro bono matters, the issue is what a successful party is actually obliged to pay given that, technically, no loss (no costs paid) has occurred. Many pro bono costs agreements are worded on a conditional basis. There has been a tension between the indemnity principle and conditional agreements. (For non-litigators, a "conditional costs agreement" is one in which payment of a lawyer's costs is dependent on a successful outcome in the matter.)

In the relatively recent Victorian Court of Appeal decision of Mainieri & Anor v Cirillo (Mainieri), the Court confirmed that a "conditional costs agreement" does not offend the indemnity principle if the pro bono client is liable to pay costs if a costs award is made in their favour. 

The new Supreme Court (Chapter I Recovery of Pro Bono Costs Amendment) Rules 2017 (Rules) provide further and unequivocal support for this position and ultimately reinforce the Court's decision in Mainieri, via the Court's own rules. 

The wording of the costs agreement will be crucial. 

Supreme Court (Chapter I Recovery of Pro Bono Costs Amendment) Rules 2017 

The Rules came into operation on 1 April 2017. 

The Rules amend Order 63 of Chapter I of the Supreme Court (General Civil Procedure) Rules to provide for the recovery of costs in cases where legal practitioners are acting pro bono. 

Order 63.34.2 now states:
Orders for legal costs 

(1) If a legal practitioner provides legal assistance to an assisted party in a proceeding on a pro bono basis, the Court may make, in favour of the assisted party, any order for the recovery of the costs of the legal assistance that the Court might have made had the legal assistance been provided not on a pro bono basis but on the basis that the assisted party was under an obligation to pay for the legal assistance in the ordinary way. 

Under the new Rules, Order 63.34.3 specifically overcomes previous concerns about a conflict between the indemnity principle on the one hand and conditional costs agreements on the other. 

New Rules aim for fairness in regard to litigants' costs exposure

As most litigators will know, costs are very rarely awarded in pro bono matters. Litigators will also know that costs are a matter of broad discretion for the court. 

But the key issue at hand is about creating a level playing field. 

In matters where one party is represented pro bono, the opponent litigant may have less incentive to settle a matter or act prudently throughout the course of the litigation, in circumstances where they know that if an adverse costs order is made against them, their costs exposure is not the same as that person represented on a pro bono basis. 

So the public policy rationale underpinning the Rules appears to reflect this and the changes to the Rules are a very welcome development in Victoria. 

A further point: as distinct from "no win, no fee" matters, conditional costs arrangements in pro bono matters often result in firms using those funds recovered to further invest in their pro bono programs (e.g. covering disbursement costs, etc), thereby leading to even more pro bono work being undertaken, or the funds may be donated to a community legal centre or other charity aligned to the successful pro bono matter. In most "no win, no fee" matters, the funds become firm revenue. 

Recovery of costs advocacy recognised by Supreme Court of Victoria 

The Australian Pro Bono Centre, pro bono leaders, law firms and public interest organisations have long lobbied for legislative change regarding the issue of costs recovery in pro bono matters. The Australian Pro Bono Centre has been a particularly strong advocate and its (and others) advocacy has been recognised by the Court. 

The Victorian Supreme Court should be applauded for taking this step. It is hoped that other jurisdictions may now follow suit. 

This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2023.