Legal Practitioner's Costs
Legal costs paid to your solicitor are generally referred to as “solicitor and own client costs” and are made up of the fees payable to your solicitor for professional services (professional fees) and disbursements. Disbursements are generally defined as being payments the law practice makes on behalf of the client – for example Court filing fees and Counsel’s fees.
Costing methods
There are several methods a legal practitioner can use to calculate their professional fees. In the absence of a costs agreement which specifies a different basis of calculation, the professional fees of a legal practitioner are determined by statutory scales of costs. Scales of costs are regulated by Acts of Parliament or Statutory Rules and their application is supervised by the Courts.
Specific Scales of costs
Practitioner Remuneration Order (PRO)
For a non-litigious matter (that is a matter that does not involve the commencement or conduct of proceedings in a court or tribunal – for example the administration of a deceased estate or the sale of a property) practitioners can apply the Practitioner Remuneration Order (PRO) to calculate their professional fees.
The PRO is generally updated annually.
Supreme Court Probate Scale
An exception to the costing of non-litigious matters in accordance with the PRO is uncontested applications for grants of probate. This scale is based on the gross value of the estate – liabilities are not taken into account. Work connected with the general administration of the estate is charged in accordance with the first schedule of the PRO.
Court scales
Litigious matters (matters that involve, or are likely to involve the issue of proceedings), can also be costed using a statutory scale of costs. A legal practice, in the absence of a costs agreement, will calculate its professional fees by applying the statutory scales of costs.
Most Victorian and Federal courts have their own scale of costs. If work is litigious, even when carried out prior to the issue of proceedings, the scale of costs applicable to the court where proceedings will be issued is applied.
Scales of costs generally prescribe charges that a practitioner can make for various items of work – everything from preparing a document to issue Court proceedings, making a telephone call to writing a letter.
There are no separate scales of costs specifically applicable to criminal proceedings.
Other methods of costing
You and your solicitor can agree to enter into a Costs Agreement, where professional fees will not be calculated using scales of costs but rather will be calculated in accordance with a stated formula.
The most common alternative methods for calculating professional fees are:
- Costing based on time
- Fixed rate agreements
- Mixture of scales of costs and either of the above.
Note: If a costing method is not discussed between you and your legal practitioner and you do not enter into a costs agreement, the appropriate statutory scale of costs will be applied in calculating the practitioner’s professional fees.
Costing Agreements
Where the legal practitioner proposes to adopt a method of costing applying other than the statutory scales of costs (e.g. time based charges or fixed fees), a formal costs agreement between the legal practice and client must set out the basis on which professional fees will be calculated.
A costs agreement must be:
- written or evidenced in writing although acceptance of a written offer can be implied by the conduct of a client (for example continuing to give the practitioner instructions)
- compliant with all the usual contractual principles (e.g. certainty and absence of fraud or misrepresentation)
- fair and reasonable
- understood by and agreeable to the client
Some costs agreements can be conditional on success (often known as “no win no fee” agreements), whereby payment of some or all of the legal costs is contingent on the successful outcome of the matter to which those costs relate. A conditional costs agreement can also provide for the payment of a premium (also known as an “uplift fee”) of up to 25 per cent of the professional fees otherwise payable if there is a successful outcome of the matter.
A conditional costs agreement cannot apply to criminal proceedings or proceedings under the Family Law Act 1975.
Setting aside costs agreements
A client can apply to the Victorian Civil and Administrative Tribunal (VCAT) to set aside a costs agreement. VCAT will set aside a costs agreement if satisfied that the agreement is not “fair or reasonable”. In determining whether a costs agreement is fair and reasonable, VCAT will consider both the circumstances under which the agreement was entered into (including whether the legal practice disclosed the information it must provide to a client) and the reasonableness of the terms of the costs agreement itself.
If the costs agreement is set aside, VCAT can order that the professional fees are to be calculated on another basis. VCAT can also order the legal practitioner to pay the client’s costs of the hearing although if the costs agreement is not set aside, VCAT may order the client to pay the legal practitioner's costs of the hearing.
There is no time limit for making this type of application to VCAT.
Disclosure
The Legal Profession Act 2004 requires law practices to provide specific information to most clients as soon as practicable after the law practice is retained.
The information that the law practice must disclose to the client includes:
- the basis on which legal costs will be charged
- the client’s right to negotiate a costs agreement and receive a bill from the law practice
- the client’s right to request an itemized bill within 30 days after receipt of a lump sum bill
- an estimate or range of estimates of the total legal costs likely to be incurred
- details of the intervals (if any) at which the client will be billed
- the rate of interest (if any) that the law practice charges on overdue costs
- for litigious matters, an estimate of the range of costs that may be recovered from another party if the client is successful in litigation and the range of costs the client may be ordered to pay to another party if the client is unsuccessful
- the client’s right to receive progress reports
- the avenues open to the client in the event of a dispute in relation to legal costs
- details of the person whom the client may contact to discuss the legal costs
Disclosure must be made in writing before or as soon as practicable after the law practice is retained in the matter. There is also an on-going obligation to advise the client as soon as the practitioner is aware of any substantial change to the information previously disclosed. There are also rules in relation to the information that must be disclosed if another law practice (including a barrister) is retained on behalf of the client.
A law practice is exempt from the disclosure requirements when:
- the total legal costs, excluding disbursements, are not likely to exceed $825 (inc. GST)
- the client has received at least one disclosure in the previous 12 months and agrees in writing to waive the right to disclosure, and the principal of the law practice decides on reasonable grounds that further disclosure is not warranted
- the client is a “sophisticated” client (as defined by s3.4.2 of the Legal Profession Act 2004)
Regardless of the exceptions to the disclosure requirements, you (as the client) retain the right to negotiate a costs agreement, to obtain progress reports and reasonable information in relation to any of the matters detailed above and to receive a bill from the law practice.
If a law practice fails to disclose any information as required by the Legal Profession Act, the client does not have to pay the legal costs unless they have been reviewed by the Taxing Master of the Supreme Court, usually at the expense of the law practice. The client may also apply to have a costs agreement set aside if the law practice fails to disclose information to the client. Failure to disclose is a matter taken into account by VCAT in considering whether to set aside a costs agreement and the Taxing Master of the Supreme Court, on an application to review legal costs, may reduce those costs by an amount considered to be proportionate to the seriousness of the failure to disclose.
Disbursements
In addition to a practitioner’s professional fees, a legal practice will bill for disbursements, which are payments the practice makes on behalf of the client. These include:
- court and other fees
- fees of barristers and other experts (for opinions and court appearances)
- title fees
- stamp duty
Any monies received by the law practice from the client on account of disbursements will be kept in the practice's trust account until the fees are paid unless you authorise otherwise.
Bills of Costs and Billing
Bills of Costs
Generally, a legal practice cannot commence proceedings to recover legal costs until at least 65 days after delivery of a bill of costs. A bill of costs can either be in the form of a lump sum bill (a bill that describes the legal services to which it relates and specifies the total amount of costs) or an itemized bill (a bill that specifies in detail how the legal costs are made up).
A bill of costs must be signed on behalf of the legal practice and must include or be accompanied by a written statement setting out the avenues that are open to the client in the event of a dispute in relation to legal costs.
If a bill is given by the law practice in the form of a lump sum bill, the client may, within 30 days after the bill is given, request the law practice to give them an itemized bill of costs. The law practice must comply with the request within 21 days and cannot commence recovery proceedings until at least 35 days after complying with the request.
Client files
Your client file will be used by the legal practice to calculate your final bill. It will often contain:
- Client instruction sheet – includes your details, the type of work to be done and information necessary to begin the work
- Diary notes – contemporaneous, detailed record of attendances and occurrences in a file, including time taken for phone calls, personal attendances, writing of letters and preparation of documents
- List of disbursements
- Other records – correspondence, documents, drafts of documents, documents copied for Counsel, briefs and memoranda to Counsel
A client is entitled to their file on payment of the law practice’s legal costs. The legal practice is however entitled to retain all file notes and documents prepared for the practitioner’s own benefit. When legal costs are not paid, the legal practice is entitled to exercise a lien over the client’s file until the legal costs are paid.
Interim bills of costs
A legal practice may give a client an interim bill covering only a part of the legal services they were retained to provide.
Overdue accounts
The Legal Profession Act 2004 entitles a law practice to charge interest on legal costs unpaid for 30 days after the practice has given a bill of costs. Interest can be charged at a rate not exceeding the Reserve Bank's 'Cash Rate Target' plus two per cent. Invoices issued before 6 December 2007 may incur interest at the penalty interest rate (Penalty Interest Rates Act 1983).
Costs Review and Further Information
You (as a client or third party payer) are entitled to apply to the Supreme Court for a review of the whole or any part of the legal costs charged by a legal practice. An application for review must be made within 12 months after the bill of costs was given or a request for payment was made, or the costs were paid if neither a bill was given nor a request for payment made. The Taxing Master may consider an application made out of time (except by a “sophisticated” client) if the Supreme Court determines “…after having regard to the delay and the reasons for delay, that it is just and fair for the application for review to be dealt with after the 12 month period”. A law practice cannot issue recovery proceedings and any recovery proceedings on foot must be stayed if an application for review is made.
In conducting a review of legal costs, the Taxing Master must consider:
- whether or not it was reasonable to carry out the work to which the legal costs relate
- whether or not the work was carried out in a reasonable manner
- the fairness and reasonableness of the amount of costs
In considering what is a fair and reasonable amount of legal costs the Taxing Master may consider any or all of the following matters:
- the law practice’s compliance with the Legal Profession Act, regulations and legal profession rules
- any costs disclosure made by the law practice
- any relevant advertisements as to the law practice’s costs or expertise
- the skill, labour and responsibility displayed by the practitioner
- the retainer and whether the work done was within the scope of the retainer
- the complexity, novelty or difficulty of the matter
- the quality of the work done
- the place where, and the circumstances in which the legal services were provided
- the time within which the work was required to be done
- any other relevant matter
Costs of review
Whilst the costs of an application for review are at the discretion of the Taxing Master, generally the law practice will be liable for the costs of a review if the legal costs are reduced by at least 15% or the Taxing Master is satisfied that the law practice failed to comply with the disclosure requirements.
Civil Complaints – Costs Disputes
A complaint, in writing, can be made to the Legal Services Commissioner in relation to legal costs not exceeding $25,000, for financial loss where a person claims to have suffered the loss as the result of an act or omission of a lawyer and for any other genuine dispute. The dispute must be (a) between a law practice and a person charged with or liable to pay the costs or (b) a law practice and a beneficiary under a will or trust in relation to which the legal services have been provided.
A complaint relating to a costs dispute must be made within 60 days after the legal costs were payable or, if an itemized bill of costs has been requested, within 30 days after the bill is provided. There is however provision for an application to be made out of time but within four months after the time limit. All other complaints must be made within six years after the conduct complained about allegedly occurred.
If the dispute relates to unpaid legal costs, the complainant must lodge the outstanding costs with the Commissioner within 28 days from the date of making your complaint unless undue hardship can be demonstrated.
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