Different methodologies for assessing costs

Gross sum costs can be awarded as an alternative to costly and protracted costs on taxation.

There are different methodologies that can be used to calculate gross sum costs. Some were summarised in Wieland v Texxcon Pty Ltd [2016] VSCA 45:

Methodology Options in a Gross Sum Exercise

  1. … In my view there is no one option in terms of methodology in a gross sum exercise.  It will depend on the basis for costs recovery ordered in favour of the recovering party.

  1. As discussed in Pegela,[17] there are several options available in relation to methodology.  One option is the ‘analogy’ method to ‘review previous gross sum cases to identify what the percentage reduction on costs was in those cases and adopt an appropriate reduction by reference to previous practice’.  This is not an attractive option having regard to the wide range of percentages of recovery across a number of example cases referred to by Sackville J in the Seven Network Limited v New Limited.[18]
  1. A second option has been referred to as the ‘adjusted fees’ methodology.  This is a possible option where costs are recoverable on scale.  It involves taking the base hours from time records and multiplying them by the scale rate, adjusting it to account for the different scale rates applicable for particular types of work and then applying a loading for general care.  This is closest to the one proposed by the applicants and said in argument to Beach JA in this matter to be the only option.[19]
  1. A third option is the ‘Ausmaq’ method.  This can be favoured where costs are to be assessed on hourly rates.  This involves actual costs incurred, identifying work that falls outside the scope of the costs order, and then breaking the figure down to costs and disbursements.  As a next step appropriate hourly rates are determined and then a final calculation is made on the basis of the hourly rate options, the cost reduction for unreasonable work and the addition of disbursements.
  1. Other methodologies have been referred to in case law.[20]