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Member Services: The ins and outs of legal costing

Every Issue

Cite as: (2004) 78(7) LIJ, p.12

LIV Legal Costing Service manager Mia Johnson answers some common legal costing queries.

Do I need a costs agreement if I am charging under a statutory scale of costs?

No. Section 93(b) of the Legal Practice Act 1996 (the Act) provides for the recovery of costs in the absence of a cost agreement. The legal practitioner can recover costs on applicable practitioner remuneration orders or scale of costs. You still need to provide the information required by s86 of the Act.

Can I recover costs if I do not provide s86 information?

Yes. Failure to provide costs information does not render the retainer void.[1] However, s91 of the Act provides that a legal practitioner who fails to comply with s86 of the Act may have his or her fees reduced by an amount proportionate to the seriousness of the failure to give the information. This reduction will be determined by the Supreme Court Taxing Master or by the Legal Profession Tribunal.

Where can I obtain a precedent costs agreement?

The LIV bookshop, located at 470 Bourke Street, sells a set of precedent documents.

Can I charge the client for preparing costs information and/or a costs agreement?

No. This is not legal work required by the client. It is a legislative requirement.

Can I charge for the time I spend on a client’s matter?

No. Activities such as internal administration,[2] further education and discussions with other practitioners in the office[3] are usually considered non-chargeable. The expense of each fee earner, the amount of chargeable time and the amount of non-chargeable time are taken into account to determine the hourly rate.[4] The lower the amount of non-chargeable time in your equation, the lower the hourly rate.

Are photocopies and faxes charged as disbursements?

Usually no. These are items of professional work and not disbursements. They are disbursements, however, when you pay for professional printing or if you make a payment to copy or fax a document when outside the office. Disbursements are payments the legal practitioner is bound to make in the discharge of their duty to the client.[5]

Am I responsible for paying counsel’s fees or is it the client’s responsibility?

You are responsible. The only exception is when the client expressly authorises you to act as the client’s agent when contracting with counsel. Counsel must be notified you are acting as an agent of the client.[6] Authority and notification should be in writing.

Is my computer printout of time spent an itemised bill of costs?

Usually no. An itemised bill of costs must describe each item of work, the date it was performed, the time taken (if the item is chargeable by time) and the charge.[7] An itemised bill of costs enables the client to decide whether or not to dispute the bill. It is important to group items dealing with the same subject matter and not to simply give a chronological list of the work done.[8]

Do I pay GST on title search fees, property information certificates and birth, death and marriage certificates?

Yes. The first person that pays these fees cannot claim an input tax credit because the fees are GST exempt.[9] When the information is on sold, for example, by a professional searcher to a legal practitioner and on to the client these are taxable supplies and GST is payable. The Australian Taxation Office does not consider your professional searcher to be your agent nor you to be your client’s agent.[1]0

Do I pay GST on Land Titles Office registration fees, stamp duty and court fees?

No. You incur these fees as agent for your client.[1]1 These fees are GST exempt so if your client is registered for GST, your client cannot obtain an input tax credit.

Can party and party costs be paid into my office account?

No. Party and party costs are an indemnity to your client and belong to your client.[1]2 They must be paid into your trust account. If the provisions of r31 of the Trust Account Practice Rules are complied with, you can deduct the amount of your tax invoice or part of it from trust money. This applies to costs the party is entitled to under the Rules.

Does my client pay GST on party and party costs he or she has received?

No. Party and party costs received by a successful party are not subject to GST. There is no supply for consideration from the successful party to the unsuccessful party. Party and party costs are essentially paying compensation for costs or losses incurred in the dispute.[1]3

The Law Institute’s Costing service can help with all your costing requirements. Visit for information on services, prices and turnaround times or contact Mia Johnson and Neil Collins on tel (03) 9607 9403.

[1] Chakera v Kuzamanovic & Anor [2003] VSC 92 (19 March 2003).

[2] The Expense of Time (4th edn), The Law Society (England) p12.

[3] Law Society of New South Wales v Foreman (1994) 34 NSWLR 408 at 436.

[4] Note 2 above.

[5] In Re Remnant (1849) 11 Beav 603.

[6] Dimos v Hanos & Egan [2001] VSC 173 (29 May 2001).

[7] Section 3 of the Act, definition of “itemised bill” and Supreme Court (General Civil Procedure) Rules 1996 r63,42.

[8] Slingsby v A-G 1918 P 236.

[9] Treasurer’s Determination, gazetted 1 March 2000.

[10] Stacey, P, “ATO clarifies GST treatment of search fees” (2004) 78(3) LIJ 57 and Johnson, M, “Notes on legal costs” (2001) 75(3) 73.

[11] Tax Ruling GSTR 2000/37, paras 48 to 53 inclusive.

[12] Gundry v Sainsbury [1910] 1 KB 645.

[13] Tax Ruling GSTR 2000/D23.


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