Worked Estimates and Checklists
Is it worth suing? A cost-benefit check before you start a claim in Australia
A practical method to decide whether a claim is worth pursuing: net recovery if you win, cost if you lose, chances, enforcement risk and cheaper alternatives, with worked numbers.
A claim is worth pursuing when the realistic net amount you could collect, after your own legal costs and the gap a costs order leaves, is clearly larger than the realistic downside if you lose, weighted by your chances, and when there is no cheaper route to the same result. Five numbers drive the decision: the amount you could win, your total legal costs, the share of those costs you could recover, the other side's costs if you lose, and the chance the other side can actually pay. If you cannot fill in those numbers, the first step is a short paid advice session to get them, not a court filing.
This guide is part of how to estimate legal costs. The numbers are illustrative.
The five numbers
| Number | Where it comes from |
|---|---|
| A. Likely amount if you win | Your lawyer's view of the realistic judgment, not the claim's headline figure |
| B. Your total legal costs to the end | The lawyer's written estimate, including disbursements and GST |
| C. Share of B you could recover | The lawyer's estimate of ordinary-basis recovery in that court |
| D. Other side's recoverable costs if you lose | The lawyer's estimate; required in full disclosures for litigation |
| E. Chance of collecting | Does the other side have assets, insurance or income? |
Worked example 1: unpaid invoices (illustrative)
A consultant is owed $48,000 by a client company. The company disputes the quality of the work.
- A = $48,000 (assume the full amount if successful)
- B = $36,000 to a two-day Local or Magistrates Court hearing
- C = 60%, so recovery $21,600 and gap $14,400
- D = $34,000 x 60% = $20,400
- E = The company is trading and has assets: collection likely
If you win: $48,000 - $14,400 = $33,600 net. If you lose: -$36,000 - $20,400 = -$56,400.
With a lawyer's estimate of a 65% chance of winning: 0.65 x $33,600 + 0.35 x (-$56,400) = $21,840 - $19,740 = about $2,100.
The expected value is barely positive and the downside is large. That points to negotiation, a letter of demand, an offer of compromise to put costs pressure on the client, or mediation rather than a full hearing. See offers of compromise.
Worked example 2: the same claim, early settlement (illustrative)
The consultant sends a lawyer's letter of demand ($1,650) and attends mediation after filing (further $9,350, so $11,000 total). The client offers $38,000 at mediation.
Net: $38,000 - $11,000 = $27,000, with no risk. That is better than the expected value of going to hearing in example 1, even though it is $10,000 less than the claim.
Worked example 3: a small consumer claim (illustrative)
A $6,500 dispute with a retailer over a faulty appliance. A lawyer-run court claim is likely to cost more than the amount at stake. A complaint to the state fair trading agency, then a tribunal claim run yourself, costs a filing fee and your time. See small claims and tribunals versus a lawyer.
Factors the numbers miss
- Limitation periods. Many civil claims must be started within a set period (often six years for contract claims in most states, shorter for some claims). Waiting to decide can remove the option.
- Enforcement. A judgment against someone with no assets is a piece of paper. Check company searches, property searches and insolvency notices first.
- Counterclaims. Suing can trigger a cross-claim that changes the maths.
- Time and stress. Litigation takes months to years and your own time is rarely recoverable.
- Relationships and reputation. Ongoing business or family relationships may be worth more than the claim.
- Precedent and principle. Sometimes a matter is worth more than its money value, but decide that consciously.
Cheaper ways to get the same result
| Route | Typical cost | Good for |
|---|---|---|
| Your own letter of demand | Your time | Clear debts, first step |
| Lawyer's letter of demand | A fixed fee in many firms | Showing you are serious |
| Fair trading conciliation | Free | Consumer disputes with traders |
| Industry ombudsman or EDR scheme | Free for consumers | Banks, insurers, super, telcos, energy and water |
| Small business commissioner or mediation service | Free or low cost in many states | Small business disputes |
| Tribunal or small claims | Filing fee | Smaller claims within limits |
| Mediation | Shared mediator fee | Disputes where both sides want to settle |
A decision checklist
- I have a written estimate of my total costs to hearing
- I know roughly what I could recover in costs and what I could pay if I lose
- I have asked my lawyer for a realistic view of my chances
- I have checked the other side can pay
- I have checked the limitation period
- I have tried, or considered, a cheaper route first
- I have a budget limit at which I will stop or settle
Run the costs side through the costs recovery gap calculator and the full budget method in how to estimate legal costs.
Frequently asked questions
Should I sue on principle even if it does not pay?
That is your decision, but make it with the full downside in view, including possible adverse costs. A lawyer can tell you whether there are cheaper ways to make the point.
Can I stop a case if it becomes too expensive?
Usually, but discontinuing a claim normally means paying the other side's costs to that point unless you agree otherwise. Settling is usually cheaper than discontinuing.
Does insurance ever pay for a claim?
Some home, landlord, business and car policies include limited legal expenses cover or will defend you against claims. Check your policy wording before you instruct a lawyer.
Sources
- LawAccess NSW — information on resolving disputes and limitation periods in NSW
- Victoria Legal Aid — information on civil disputes and debts
- Australian Financial Complaints Authority — free dispute resolution for financial services
- Office of the Legal Services Commissioner (NSW) — costs estimates and disclosure
