Legal Costs and Fees

Only limited information is provided here about costs and the requirements to disclose them. Should you require more information retain a solicitor to advise you in detail.

Legal practitioners and their clients are free to negotiate fees subject to statutory limitations e.g. workers compensation and motor accidents costs are regulated. Public Notaries’ fees are set by the Society of Notaries. Professional costs remain regulated in commonwealth courts and tribunals.

The introduction of the Legal Professional Act 2004 which commenced on 1 October 2005 has effected substantial change to the law governing solicitors’ costs in New South Wales. Essentially the new regime has made costs disclosure an essential requirement for legal practitioners in New South Wales. Its purpose is to simplify and overcome complaints from clients alleging that costs have either not been disclosed or adequately disclosed so that they had a real understanding of what they would be charged.

Disclosure is mandatory and ongoing requiring a client to be notified in writing of any substantial change to an earlier disclosure. A fee variation notice is relied upon in these circumstances.

Disclosure must be made to a client or prospective client which includes a person to or for whom legal services are provided or any person who is legally liable to pay for these services even if the services are not provided to or for that person.

Disclosure

Costs Agreements are of two types:

1. Standard Costs Agreements;

2. Conditional Costs Agreements.

Any good costs agreement including a disclosure document should cover matters required by law. Some of the matters which should be covered are:

1. The basis on which costs will be calculated;

2. An estimate of the total legal costs if reasonably practicable;

3. The client’s right to negotiate and receive a bill from the law practice together with a right to an itemised bill within 30 days after receipt of a lump sum bill; and to be notified of certain specified substantial changes to the matters disclosed and to ask for progress reports.

4. Billing intervals;

5. The rate of interest on overdue costs.

Bills can be either a lump sum bill or an itemised bill. Clients cannot be charged for preparation of bills of costs. Costs are defined as fees, charges, disbursements and expenses all of which are required to be disclosed. Contingency fees are prohibited. A legal practice is entitled to obtain reasonable security for legal costs from a client.

There are also various disclosure requirements which apply to litigious matters and which clients should investigate before they retain a law practice. Although costs have been deregulated certain costs are fixed by regulation and these include workers compensation claims, personal injury claims, debt recovery matters, probate or letters of administration and matters that are not legal services.

If a law practice wishes to charge more than the regulated costs specified for motor accident, workers compensation or personal injury matters to which a maximum costs cap applies, there are certain additional disclosure requirements which need to be met.

Basically disclosure must be made in writing before or as soon as practicable after the law practice is retained in the matter. Where there is a substantial change to anything already disclosed this has to be disclosed as soon as reasonably practicable after the law practice becomes aware of that change. There are cases in which disclosure is not required to be made and one of these is where total legal costs excluding disbursements are not likely to exceed $750 excluding GST. Where the practice fails to make proper disclosure the client may refuse to pay the legal costs unless they have been assessed as required by law. Any such practice which has failed to make proper disclosure cannot proceed to recover their legal costs unless they have been properly assessed.

Interest on costs may be charged on unpaid legal costs where they remain unpaid for 30 days or more provided that the bill states this together with the rate of interest. Until recently the rate of interest allowed to be charged was 9% per annum, however, since 1/7/2006 a different formula applies.

With regard to estate matters, professional costs for the administration and finalisation of the estate can be charged at normal professional rates and these need to be disclosed as is normal with the provision of other legal services.

Where clients are dissatisfied with the costs they may seek assessment of either whole or part of the bill of costs. This normally only occurs where clients have received bills with which they are dissatisfied and have no intention of paying as they either query the amount of work done or the services provided. Generally speaking a client has 60 days after being given a bill in which to make an application for assessment.

Legal Profession Act 2004

Revised costs agreement requirements are dealt with under the Legal Professional Act 2004 and amendments.

Civil Procedure Act 2005
Uniform Civil Procedure Rules 2005

Costs against a Legal Practitioner

Costs can be imposed against a legal practitioner if unnecessary costs are incurred due to the failure or delay by the legal practitioner.

The power to award costs against a legal practitioner in proceedings has been extended to the Local Court.

Offers of Compromise

Under the uniform rules offers of compromise may be made at any stage of the proceedings up until the time the Trial Judge commences to sum up or give reasons. The 28-day period for acceptance may be shortened when the offer is made less than two months before the hearing to a period that is reasonable in the circumstances.

Solicitor and Clients Costs

Such costs are based in contract called a retainer

Party/party costs

• Party/party costs are what the court orders one party to litigation to pay to another party to that litigation.
• Generally, party/party costs were taxed in the range of 60-75% of solicitor and client costs
• Costs are awarded in civil proceedings only.
• Party/party costs are to be assessed on the “ordinary basis” unless the court orders otherwise. If the court does not order otherwise, then an order is made for costs to be paid on an indemnity basis.
• Family law matters are an exception to the general rule in civil matters in that normally each party pays their own costs

Costs Assessment

The Legal Profession Act 2004 deals with “Costs Disclosure & Assessment”. The defining elements of the Act are:

• The concept of disclosure
• Costs agreements
• De-regulation of most scales
• The assessment system

The Act provides for “reasonable” costs to be paid. What are reasonable costs?

• Party/party costs are assessed by Supreme Court appointed cost assessors.
• The Act provides some guidance as to certain things a cost assessor must take into account and may take into account.
• A fully itemised bill of costs can be prepared with the assistance of cost consultants. Lump sum bills are normally issued. A fully itemised a bill is normally only required where requested by a client or where in dispute.

Civil Liability Act

The amount of costs that can be recovered by legal practitioners in personal injury or death claims is limited. Where the amount recovered (or sought to be recovered) by the Plaintiff is less than $100,000.00, the recoverable costs are limited to the greater of 20% of the amount awarded or $10,000.00.

Costs Orders against Solicitors

The Legal Profession Act requires certification as to the reasonable prospects of success of the statement of claim or defence.

The Court of Appeal in Lemoto v Abel Technical Pty Ltd has now provided guidelines to certifying solicitors.

The Court of Appeal noted that the Trial Judge has a discretion in the granting of a costs order against a solicitor.

Calderbank Letters

Derived their name from the 1975 English Court of Appeal decision in Calderbank v Calderbank. The court in obiter dictum held that a letter expressed to be “without prejudice” to the issue as to damages, (substitute “liability”) but reserving the right to refer to the letter on the question of costs, could be both an appropriate manner of making an offer of compromise and would be admissible on the question of costs.

In the 2004 Court of Appeal decision of Leichhardt Municipal Council v Green, it was held in part:

An offer which requires that a party capitulates on its claim including the payment of another party’s costs cannot be considered to be a genuine offer of compromise.

There is no principle of law or persuasive policy reason why a defendant’s unaccepted offer of compromise made by Calderbank letter should give rise to costs sanctions on any basis different to that provided by the rules… a defendant must resort to showing that the plaintiff’s rejection of the offer was ‘unreasonable’ under the general law.

It is preferable to consider applications for indemnity costs following unaccepted offers of compromise by a defendant as being applications for a favourable exercise of the court’s general discretion toward awarding indemnity costs. As far as Calderbank offers go, there is very little difference, the cost consequences of these lying entirely within the court’s general inherent discretion on costs.

Law Society Pro Bono Referral Scheme

The scheme is not a substitute for legal aid. It is a key criterion of the scheme that legal aid has been refused.

Pro bono work is legal work performed at no fee or at a substantially reduced fee.

The current trend is to require applicants to make some contribution to the cost of running their matters.

Litigation Costs Funders

The funders “invest” in legal actions.

Maintenance and champery laws have been abolished in New South Wales and Victoria although a Judge can still declare funding arrangements against the public interest.

Some law firms work on a “no win – no fee” basis, but they don’t offer to cover the other party’s costs if the case is lost.

Suitors Fund Act

The fund, established in 1951, recompenses parties when there is a clear failure on the part of the court system, such as when an Appeal Court orders a re-trial or quashes a verdict. It also covers administrative errors, such as not having a Judge available on the agreed date due to illness or otherwise.

Legal Professional Amendment Act 2006

The Legal Professional Amendment Act 2006 commenced on 2 June 2006 with the exception of the provisions relating to interest charges which commenced on 1 July 2006.

Some important amendments are:

1. The maximum uplift fee of 25% only applies to litigious matters 

2. With interest the maximum rate which can be charged after 1/7/2006 is the Cash Rate specified by the Reserve Bank of Australia, increased by 2%.

3. Interest can be charged 30 days after giving a lump sum bill, even though the client is subsequently given on request an itemised bill.

4. If a conditional costs agreement with an uplift fee is held to be void the uplift fee cannot be recovered, or if recovered, must be repaid.

5. Where a lump sum bill is given to the client and an itemised bill is requested proceedings for recovery of costs cannot be instituted until 30 days have elapsed after complying with the request.

6. Provision of a costs agreement which are not fair and reasonable can be set aside.

7. Certain exemptions have been increased.