The majority of people working within the legal profession are undoubtedly ethical and will represent the needs of their clients to the best of their abilities. Clients are reliant on the skill of their lawyer to ensure that their matter is not only well attended to professionally, but they are also adhering to the requirements in relation to costs disclosure and costs agreements when dealing with a client. Due to the potential costs that may be involved when dealing with a legal matter, the law has placed a number of protections to ensure clients aren’t financially disadvantaged, such as:
- costs disclosure requirements;
- sanctions against legal practitioners who charge excessive fees;
- review of costs by an independent body;
- setting aside cost agreements under certain circumstances.
What are the general requirements in relation to costs disclosure?
Firstly, it’s always a good idea when entering into a legal relationship with a lawyer that the contract, known as a retainer, is produced in writing – although it’s not a requirement. It’s essential to try and have the retainer in writing because it is within such a document that the lawyer’s claim to costs can be ascertained.
However, the majority of jurisdictions in Australia require lawyers to disclose in writing up front some of the following information such as:
- an estimate of the total legal costs;
- the rights for clients to negotiate a costs agreement, to receive an itemised bill, and notice of any significant changes – including reports on the progress of their matter;
- an explanation for the basis of calculating legal costs;
- if the matter proceeds to litigation, an estimate of the costs which may be recovered whether the matter succeeds or fails;
- disclosure prior to settlement;
- disclosure to the client regarding the possible availability of legal aid for their matter.
In instances where the lawyer does not disclose the anticipated costs, they may not be able to recover any costs without the bill being assessed by a superior court, such as the Supreme Court.
Are there any exceptions to costs disclosure requirements?
If the total fee is under the threshold amount of $750 (excluding disbursements) as is the case in New South Wales and Victoria for example, or the costs will not exceed the minimum threshold amount, lawyers are not compelled to disclose costs.
Additional exceptions can include the client receiving more than one disclosure over the previous year, the client has decided to waive the disclosure requirements, the agreement is still in force, or the lawyer is working on the matter on a pro bono basis are a few of a number of exceptions.
How are clients charged?
There are a number of ways in which a lawyer is able to charge a client for their work and beyond certain matters, the fees charged should generally be reasonable. For matters that aren’t regulated, lawyers can either charge a fixed amount, or charge for their services on an hourly basis.
Other methods of payment can include:
- lump sum charges;
- charging on an item-by-item basis (eg producing letters, preparing court documentation);
- no win, no fee (always try to find out what ‘no win, no fee’ exactly means).
Matters that may be regulated can involve:
- family law;
- workers compensation in certain jurisdictions;
- victims compensation;
- motor accident claims;
- deceased estates.
Trust account: When paying a lawyer for their services, they can make a request for costs and disbursements at the initial stage of proceedings, or alternatively, money can be placed in a trust account which is then used for necessary expenses relating to the matter.
Lawyer’s bill: At the conclusion of a matter, the legal practitioner will send a memorandum of costs and disbursements which will outline all of the work done in relation to the matter.
Party costs: If a matter has proceeded to court, and upon receiving costs from the other party, legal practitioners will refund a client for costs incurred.
What options are available if someone feels they have been overcharged by their lawyer?
A common area of complaint for clients is the amount of costs involved in a matter, and for clients who are unhappy, especially in relation to the area of costs, there are a number of avenues for resolution for their concerns.
Please be aware that anyone wishing to make an application for costs assessment must generally do so within 12 months upon either receiving the bill, or a request for payment, or when a person has paid their costs. Extensions will only be granted by the Supreme Court in special circumstances based on the merits of each individual matter.
State or Territory Legal Services Commissioner
Complaints directed against solicitors or barristers can be made to the appropriate State or Territory Legal Services Commissioner (the Commissioner).
When making a complaint, it usually must be done in writing and the legal practitioner or the firm to whom the complaint is directed against must be identifiable, along with the description of the behaviour in question – such as overcharging. Depending on the jurisdiction, a complaint must be made within a certain time period (for example, 3 years in New South Wales).
If a client believes that they have been overcharged, an application can be submitted to an assessment scheme.
The Costs Assessment Scheme
A person who believes they have been overcharged can seek to have their bill assessed by the Costs Assessment Scheme. A bill can be assessed to ensure that the costs administered are and reasonable, the amount charged for was reasonable in relation to the type of work conducted, which may include the complexity or novelty of the matter, and the work was completed in a manner that is considered to be reasonable.
Upon the conclusion of the assessment, a bill will be sent to an independent body to assess the costs, and the body will then make a decision on whether the final bill was reasonable.
Clients can seek an independent party, such as Legal Costs Investigations Pty Ltd (LCI) if they are unhappy with the final bill. LCI operates Australia wide and can deal with all areas of law.
Upon the receiving of the initial request for review, LCI will make an assessment whether to proceed with a matter. It should also be noted that there will be no costs involved in the initial assessment, however, this may also depend on the complexity and scale of the matter.
LCI does not provide legal advice, but rather, they work in conjunction with a panel of lawyers and cost consultants who provide assistance where possible.
Depending on the complexity of the matter, the fee may be shared between LCI and the client as agreed upon if recovery costs are successful. However, one of the value propositions of LCI is if recovery is unsuccessful, the company bears the brunt of the costs.
For anyone wishing to contact LCI you can do so through email or by phone at 0447 908 689.