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From the President - Costs disclosure requirements

Every Issue

Cite as: (2006) 80(9) LIJ, p. 4


Victorian Costs Disclosure requirements are working to protect consumers.

Since the introduction of Victoria’s Legal Profession Act 2004 (the Act) in December 2005, Victorian lawyers have been subject to strict new costs disclosure requirements.

Practitioners must provide clients with an estimate of the total legal costs if reasonably practicable, and if not reasonably practicable, an estimate of total costs and an explanation of the variables that will affect the calculation of those costs.

Legal practitioners who fail to meet their disclosure obligations cannot recover costs until they have been assessed by the Taxing Master. The requirements under the Act are also supplemented by further regulation under the Professional Conduct and Practice Rules 2005.

The response from clients to the new disclosure regime has been mixed, with reports of some clients being bemused or indeed overwhelmed by the disclosure material provided by their lawyer.

However, the Law Institute of Victoria (LIV) supports the new disclosure regime. It encourages all practitioners to comply with the requirement as a means of open communication with clients and as a way to reduce any possible surprise about bills at the conclusion of a matter and subsequent complaints.

The Act, as it presently stands, is a thoughtful and relevant response to clients’ needs and provides protection to consumers of legal services.

However, at a recent meeting of the Standing Committee of Attorneys-General, NSW Attorney-General Bob Debus is reported to have urged the implementation of further disclosure requirements to provide for more accurate estimates of likely legal costs and expenses and for such a regime to be adopted nationally.

The penalty for failing to comply with this regime would be to impose a 20 per cent reduction in assessed legal costs if the assessed costs exceeded the costs estimates. NSW is the only state to have abandoned scales of costs as a method of charging for legal services and, as such, to introduce the proposed NSW model nationally would require substantial changes to the way legal services are costed in every other state and territory, including Victoria.

The push in NSW to introduce a different disclosure regime stems from a report by the Legal Fees Review Panel.

The Panel was established in February 2004 to review legal costs in NSW and includes representatives from the NSW’s Law Society, Bar, Office of the Legal Services Commissioner and Attorney-General’s Department.

The review followed an Opening of the Legal Year address by the NSW Chief Justice Spigelman on the “tyranny of the billable hour”.

Although the Panel made many recommendations [see http://www.lawlink.nsw.gov.au/lawlink/olsc/ll_olsc.nsf/vwPreviewActivePages/OLSC_lfrp for the Panel’s report], the LIV believes that the specific recommendations relating to disclosure should not be introduced nationally.

In Victoria, if a client has not entered into a costs agreement then the law practice can only charge costs on the applicable scale. A similar situation exists in all other states and territories. That NSW, which is the only state to have abolished scales of costs, should seek to impose a costs regime on all the states before the full implementation of the uniform laws regulating the legal profession by all states is hard to understand.

The LIV is currently conducting a review of the Supreme Court scale of costs, following a funding grant from the Victoria Law Foundation.

The current scale has existed, largely unchanged, since the 1950s. The proposed draft scale has been completed and circulated to stakeholders within the profession for comment. It attempts to include electronic means of communication and allows for reasonable costs for new methods of discovery.

The LIV hopes that, once the scale is adopted by the Supreme Court, it will also be adopted by the County and Magistrates’ Courts and VCAT, albeit with different rates.

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