Frequently Asked Questions

• Does the Legal Services Council provide any costs precedents?

  The following costs precedents are available to all practitioners, through the Legal Services Council:

  • Standard costs disclosure form for clients (DOC download) (Can be used where legal costs are not likely to exceed $3000 (excluding GST and disbursements..
  • Information sheet for legal practitioners – Costs disclosure form (PDF).
  • Information sheet for consumers – Costs disclosure form (PDF)(The Legal Services Council recommends that this information sheet be provided together with the uniform standard costs disclosure form).
• Does the Law Society of NSW (LSNSW) provide any other information about costs?

  LSNSW provides a range of fact sheets about Costs – some of which are set out below:

  • Billing (PDF)
  • Costs disclosure – reasonable steps (PDF)
  • Costs disclosure under the Legal Profession Uniform Law (PDF)
  • Consumer complaints (PDF)
  • Transitional provisions – costs (PDF)
• What are the cost disclosure requirements under the Uniform Law?

  The Legal Profession Uniform Law Application Act 2014 (Vic)(the Uniform Law) requires legal practices to provide costs disclosure statements to clients in both litigious and non-litigious matters. The specific disclosure requirements are outlined in Division 3, ss174-177 of the Uniform Law.

  Section 174 of the Uniform Law details the circumstances where disclosure is not required:

  • if (a) the total legal costs, excluding disbursements, are not likely to exceed $750 (excluding GST)
  • if the practitioner is acting on a pro bono basis, where not costs are payable, or
  • where the client is a “government or commercial client” or is one of the other entities to whom disclosure is not required to be made, as defined in s170 of the Uniform Law.

  Even if full disclosure is not required, the client still retains the right to progress reports, reasonable costs information and a bill of costs, as well as the right to negotiate a costs agreement – see s174(2) of the Uniform Law.

  There are additional disclosure requirements for conditional cost agreements and those involving an uplift fee. Crucially, those disclosures must be made in the agreement itself, as opposed to being made in a separate disclosure statement.

  Before signing a conditional cost agreement, a client must be informed of his or her right to obtain independent legal advice about the effect of the agreement.

• What are the consequences for failure to disclose?

  Under section 178 of the Act, the most serious consequence of a contravention of the disclosure provisions of the Uniform Law is that any cost agreement is void. Further, the client does not have to pay the legal costs until they have been reviewed by the court or the Legal Services Commissioner (and the practitioner cannot maintain proceedings to recover unpaid fees until this review has taken place). The practitioner will usually have to pay the costs of the review, and the failure to disclose can also result in a reduction in the allowed costs, by an amount proportionate to the failure. Finally, substantial compliance failure can constitute unsatisfactory professional conduct or misconduct.

• What are some of the considerations that should be taken into account when establishing a costs agreement?

  The right to charge for legal work arises from the retainer. The basis on which the costs are calculated are either by reference to the terms of a costs agreement or on the basis of the “fair and reasonable” value of the work (quantum meruit basis).

  Costs agreements must be written or evidenced in writing. With the exception of conditional (no win/no fee) cost agreements, there is no specific requirement that the agreement be signed, but if the agreement is to be accepted in some other way (eg through the continued provision of instructions), the conduct which will constitute acceptance must be detailed in the costs agreement.

  Practitioners should ensure that there is proof that a client has accepted the terms of a cost agreement. Sections 179-180 of the Uniform Law fully details the requirements for a costs agreement.

  A conditional costs agreement may provide that the payment of some or all of the legal costs is conditional on the successful outcome of the matter to which those costs relate – see ss181-182 of the Uniform Law.

• What are some common approaches to pricing legal work?

  The most common approaches to pricing legal work are set out below:

  • By reference to time (hourly based arrangements) – charging for the actual time spent on a particular task. Rates usually vary according to the size and location of the practice and the experience of the practitioner providing the service.
  • Fixed or flat fee: charging an agreed fixed fee for the whole of a matter, for a phase, or for a task.
  • By reference to a scale of costs or Practitioner Remuneration Order.
  • On a contingency fee basis. Contingency fees can only be used in non-litigious work.
  • Conditional fee: all or part of the fee is conditional on success or some other outcome being achieved. No win/no fee agreements are one form of conditional fee arrangement. The Uniform Law imposes additional disclosure requirements for conditional fee agreements.
  • Uplift fees: normal fee is “uplifted” (increased) by an agreed percentage (limited to 25 per cent of the normal fee in litigious matters), if “success” is achieved. It is critical that success be clearly defined in the cost agreement. The Uniform Law imposes additional disclosure requirements for uplift fee agreements.

  Variations include a mix of the above options. For example, fixed fees for some aspects of the matter, and hourly rates for others. Any fee must be fair and reasonable, but what is fair and reasonable for one client or matter, may not be for another. It is important that the client be fully informed about options and give consent to the proposed pricing arrangement, and if necessary the lawyer can prove this informed consent was given.

• What are some of the key issues relating to billing and costs recovery to be aware of?

  Legal costs cannot be recovered unless a bill of costs has been served on the client. A bill of costs may be a lump sum bill of costs or an itemised bill of costs and must be signed on behalf of the legal practice – see s188 of the Uniform Law.

  Practitioners may issue interim bills covering only a part of the legal service they were retained to provide. An interim bill can be reviewed under Division 7 of the Uniform Law either at the time of the interim bill or at the time of the final bill.

  Given the cash flow constraints of smaller practices, it may be practical to impose stringent, priority payment terms (eg account payable seven or 14 days from receipt), which should be made clear to the client and incorporated in the cost agreement.

  Pro-active management of costs is one of the best protections from client disputes, as a delay in paying accounts can be an indication of client dissatisfaction or a client’s inability to pay the legal costs. Becoming aware of client dissatisfaction enables a lawyer to address the issues and thereby avoid a possible future dispute. Early awareness of the client’s financial difficulties allows a law firm to mitigate loss, by discussing with the client what fees they are able to incur, offering alternative pricing arrangements or possibly terminating the retainer.

  Interest may be charged on overdue accounts (s195 of the Uniform Law) at a rate not exceeding the rate prescribed by Rule 75 of the Legal Profession Uniform General Rules 2015,currently the Cash Rate Target plus 2 per cent.

  A request for an itemised bill of costs must be made within 30 days after the date the legal costs become payable – see s187 of the Uniform Law. The law practice must comply with a request for a detailed bill of costs within 21 days of the request date. A practitioner cannot charge for preparation of an itemised bill of costs unless the request is made by a non-associated third party payer. See s171 of the Uniform Law for definitions of terms relating to third party payers.

  If, before giving an itemised bill of costs, the law practice had previously given a lump sum bill of costs, the legal practice is bound by the quantum of a lump sum bill, the lump sum Bill contains a statement reserving the right to charge a higher amount in an itemised bill if one is requested.

  There is no particular form of an itemised bill, and what is a sufficiently itemised bill will depend on the level of sophistication of the client. Many law firm bills would be considered itemised bills, in that they have a separate charge for each task, and contain sufficient information to enable a client to form an opinion about whether the fees are fair and reasonable.

  Where the charge is a fixed fee, the Uniform Law still requires provision of an itemised bill, but such a bill will only provide details of the particular tasks undertaken as part of the fixed fee. By its nature, it is not possible (nor a requirement), that part of the fixed fee be allocated to each task.

  A law practice cannot commence proceedings for recovery of legal costs until at least 65 days after the practice has given a bill to the client, although an application can be made for leave to commence recovery proceedings sooner if a bill has been served and the client is about to leave the jurisdiction. If a person requests a detailed bill of costs within three days of receiving a lump sum bill of costs, recovery proceedings cannot be commenced for at least 35 days after service of the itemised bill of costs.

  If a person lodges a complaint with the Legal Services Commissioner or applies for a review of costs by the Costs Court, recovery proceedings cannot be commenced or continued – see s194.