Good business may dictate openness regarding costs but for lawyers it is a legal obligation.
Not long ago I required the services of a plumber, stemming from a hot water hose that split in the early hours of the morning. The plumber duly arrived in late morning, took no more than five minutes to replace the hose, made polite chit-chat, and then went his way. At no stage, whether when requesting the service over the telephone, or indeed at any time prior to receiving the bill in the mail a week or so later, did the plumbing company supply any indication of its cost, whether by way of an estimate, an hourly rate or any minimum charge. The only communication that related in any way to cost was the individual plumber’s quip that it was a pity (for me) that the job only took a few minutes, as I would be charged for an hour.
Of course, as a customer I could have asked the question. I opted against doing so not merely because I suspected the job would be minor, but as an experiment to discover whether I would be supplied with any cost estimate, or method of calculating costs, at any time. That plumbers, like other tradespeople and indeed most professionals and other business people, have no legal obligation to make cost estimates or even to disclose their approach to charging made the outcome of my experiment perhaps no surprise. Good business may dictate openness regarding costs, but the law here does not compel this outcome. This did not, however, assuage my discomfort in being at the mercy of another for costs as to which I had no notice (and no control).
It was not that long ago, in the scheme of things, that costs disclosure by lawyers to (impending) clients fell in the “good business” camp, and not the subject of legal obligation. The first Australian statutory costs disclosure prescription, including costs estimates, took effect in New South Wales on 1 July 1994.1 Equivalent provision was made in Victoria as from 1 January 1997,2 and it has since spread across each state and territory. Costs disclosure, as is well known, aims to empower the client vis-à-vis the lawyer, by giving the client the opportunity to make an informed choice costs-wise whether or not to retain the lawyer or to continue with the representation. Within the lawyer-client relationship it is designed to avoid the discomfort I experienced (on what is likely to be on a much smaller scale) in waiting for my plumber’s bill.
In order to encourage lawyers to fulfil costs disclosure obligations, legislators felt it necessary to impede costs recovery in the face of incomplete disclosure, while at the same time making explicit that it could end in disciplinary sanction. But it should not be assumed that the consequences of incomplete disclosure are confined to those prescribed by statute. In 2004 a South Australian District Court judge found a failure to disclose to a client a more meaningful estimate of the likely costs, when the lawyer could have done so, amounted to a breach of contract.3
That this decision may well have been coloured by the absence at the time of statutory costs disclosure obligations in SA does may not make it irrelevant under a statutory schema. In 2016 a NSW judge branded a law practice’s failure to provide an updated costs estimate both a breach of contract and misleading and deceptive conduct by omission (under statute).4 The judge proceeded to find that the practice had deliberately “under-quoted” in its original costs estimate as a means of securing the client. This behaviour was characterised as a breach of fiduciary duty.5
While it is perhaps unsurprising that each of these cases involved issues surrounding arguably the most challenging aspect of costs disclosure, namely costs estimates, what they do reveal is that costs disclosure is not an issue confined to the statutory arena.
Gino Dal Pont is Professor, Faculty of Law, University of Tasmania.
Pursuant to amendments to the (then) Legal Profession Act 1987 (NSW) by the Legal Profession Reform Act 1993 (NSW).
Pursuant to the (then) Legal Practice Act 1996 (Vic) Pt 4 Div 1.
Moloney v Smith  SADC 115 (although on the facts the client was unable to prove that the lawyer’s breach of duty in failing to apprise her of the likely costs had in fact caused her loss).
Burrell Solicitors Pty Ltd v Reavill Farm Pty Ltd  NSWSC 303 at  per White J.
Note 4 above, at .