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 (s145 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.