Legal Costs and Fees - Melbourne

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 eg. workers compensation and motor accidents where 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 Profession Act 2004 which commenced on 1 July 2005 has effected substantial change to the law governing solicitors’ costs in Victoria. Essentially the new regime has made costs disclosure an essential requirement for legal practitioners in Victoria. The purpose of the legislation 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:

(i) 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;

(ii) be notified of certain specified substantial changes to the matters disclosed; and

(iii) request progress reports.

4. Billing intervals;

5. The rate of interest on overdue costs.

Conditional costs agreements allow solicitors to charge an uplift fee in addition to scale solicitor/client fees contingent on success. Conditional costs agreements must:

• inform the client of his/her/its rights to seek independent legal advice;
• allow a five business day cooling off period; and
• limit the amount of the uplift fee to what is reasonable in the particular circumstances subject to an overall cap of not more than 25% in litigious matters.

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.

A cost agreement must be accompanied by a disclosure statement the main purpose of which is to estimate likely total costs to be paid by the client and, where applicable the likely costs to be recovered from or paid to a third party depending upon whether litigation is won or lost.

There are also various disclosure requirements which apply to both litigious and non- 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 advised 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 by the Taxing Master of the Victorian Supreme Court 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 reviewed by the Taxing Master.

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 12% per annum under the Penalty Interest Rates Act 1983 (Vic.).

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 charged by a lawyer 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 65 days after being given a bill in which to make an application for assessment to the Supreme Court Taxing Master. Proceedings to recover costs cannot be commenced until at least 65 days after a bill (lump sum or itemised) has been given. A bill must contain or be accompanied by a written statement setting out the avenues open in the event of a costs dispute, including time limitations.

Legal Profession Act 2004 (Vic)

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

Supreme Court Act, 1986 (Vic)

Supreme Court (General Civil Procedure) Rules, 2005 (s. 62.23)

Costs against a Legal Practitioner

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

The power to award costs against a legal practitioner in proceedings has been extended to the County Court and Magistrates’ Court under the rules of those courts.

Offers of Compromise

Under the uniform rules offers of compromise may be made at any stage of the proceedings before verdict or judgement. The 14 day period for acceptance may be shortened if the court orders, otherwise the offer of compromise cannot be withdrawn during the time it is open to be accepted.

Indemnity Costs and Solicitor & Clients Costs

Such costs are based in a contract called a retainer. They are defined in s.63 of the Supreme Court Rules. Indemnity Costs are all costs incurred by a client provided they were not unreasonably incurred or for an unreasonable amount. Solicitor and client costs are all costs reasonably incurred by a client and for a reasonable amount.

Party/party costs

• Party/party costs are traditionally what the court orders one party to litigation to pay to another party to that litigation.
• Party/party costs are defined as all costs necessary or proper for the attainment of justice or for enforcing or defending the rights of the winning party.
• Generally, party/party costs were taxed in the range of 60%-75% of solicitor and client costs and about 50%-60% of indemnity costs.
• Costs are routinely awarded in civil proceedings only.
• Family law matters are an exception to the general rule in civil matters in that normally each party pays their own costs.
• Costs are not awarded in criminal matters save for exceptional circumstances eg under the Crimes Act 1958 (Vic.) s.545 against a defendant convicted of treason or an indictable offence or against the Crown for prosecutional misconduct.

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.

Wrongs Act 1958 (Vic.)

Recent amendment of this legislation limits the amount of costs that can be recovered by legal practitioners in personal injury or death claims. 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.

Calderbank Letters

Derived their name from the 1975 English Court of Appeal decision in Calderbank v Calderbank. The court in obiter dicta 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 Institute of Victoria 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 for legally-aided or pro bono representation 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.

In August 2006 the High Court of Australia decided in Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd that “for profit” funding of plaintiffs, of itself, creates an abuse of process and is therefore a ground for staying legal proceedings. The risk remains, however, for funders that funding agreements are subsequently avoided by successful plaintiffs.

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.

Appeal Costs Act 1998

The fund, established from government funds, 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.

The Appeal Costs Act does not apply to Federal courts or to state courts exercising federal jurisdiction. The Federal Proceedings (Costs) Act 1981 (Cth) contains similar provisions governing reimbursement of costs in federal appeals.