Last Updated 9 September 2016
Solicitors have a professional responsibility to make sure that their clients are kept fully informed of all expected legal costs in a case. Part 3.4 div 4 and 5 of the Legal Profession Act 2007 (Qld) (Legal Profession Act) set out laws relating to legal costs and costs agreements. Solicitors will normally prepare a comprehensive written costs agreement. For any work that will exceed $1500 in costs, solicitors must comply with disclosure rules. They are required by law to disclose certain information about costs to their clients, and this disclosure must be made in writing.
There are two types of costs agreements. One is a conditional costs agreement, which lists fees and expenses that a client has to pay only if their case is successful (also known as a no win, no fee agreement). The other type is simply called a costs agreement, which applies to all other work where payment for fees and expenses is required irrespective of the final outcome of the case. Costs agreements may also sometimes be referred to as client agreements. A typical agreement will include (pt 3.4 Legal Profession Act):
- a summary of the work to be carried out by the solicitor, the client’s rights and any obligations in relation to payment of accounts, including fees and outlays
- the formal requirements for information that must be given to a client as part of this process (ss 308–318). A client must be given written notice of certain things (e.g. the cost or realistic estimate of the cost of the work or information about how the solicitor’s fees will be calculated (e.g. whether they are based on a scale of costs) including associated expenses)
- who in the solicitor’s office can be contacted to discuss the bill
- a statement about the client’s right to receive an itemised bill and progress reports
- an explanation about the variables that might affect the costs
- the client’s right to negotiate fees and to be kept advised of costs and costs dispute processes
- billing procedures (e.g. periodic billing patterns and the client’s right to receive progress reports/bills)
- interest rates to be charged on overdue amounts
- costs assessment and dispute processes as well as relevant time limits
- other lawyers’ fees if they are to be retained to act in the matter
- the costs that a client may have to pay the other party or that the other party may have to pay the client if the matter involves litigation, depending on the outcome of the case and orders made by a court
- any amounts or outlays that clients are expected to pay (e.g. stamp duty, filing fees, barrister’s fees)
- information about the amount of uplift fees where relevant
- notice of the five-day cooling-off period (for conditional costs agreements only).
Before asking a client to sign a costs agreement, the solicitor must provide them with the above information. Clients must be promptly notified of any substantial changes to anticipated fees or costs as a result of changed circumstances during the conduct of a case. A failure by the solicitor to comply with the disclosure obligations may affect the amount of the costs payable.
A client is entitled to seek alternative legal advice before entering into a costs agreement with a solicitor. Certainly, a person should never sign a costs agreement unless the terms of the agreement are clear and acceptable.
Costs agreements can be enforced in the same way as other types of contracts, subject to the legal practitioner complying with all relevant provisions as set out in ss 319 and 329 of the Legal Profession Act.
A costs agreement is often only prepared after the first interview between the client and solicitor. This does not mean that the first interview is free. However, some solicitors do offer a free or reduced-fee initial interview. It is wise to confirm this arrangement in writing before proceeding.
All solicitor/client costs disputes in Queensland are governed by the provisions of the Legal Profession Act. Other laws relating to costs in family law matters are contained in ch 19 of the Family Law Rules 2004 (Cth) and pt 21 of the Federal Circuit Court Rules 2001 (Cth). Factsheets about costs are also available from the Federal Circuit Court and Family Court of Australia.
How costs are calculated
There are two broad approaches to calculating solicitors’ charges. The first method is by simple agreement between the solicitor and the client, for example the client agreement may specify that the solicitor will charge $350 per hour for work done on behalf of the client.
The second way costs can be calculated is by a scale of costs (a scale of reasonable charges by a solicitor or barrister) set for each relevant court. Some types of legal work undertaken by solicitors may have a recommended scale of costs. If a scale exists for the particular work, it is usually found in the respective legislation.
Clients can limit their costs by working thoughtfully with their solicitor. For example, a client can prepare a detailed (but concise) statement or summary explaining their problem and personal circumstances before attending for an initial interview, generally minimising the costs incurred at this first contact stage. Any phone calls to solicitors will attract a fee and unnecessary calls should be avoided. It is important to remember that solicitors’ fees are charged for a range of activities, from receiving a fax, email or telephone call and photocopying documents to negotiating settlements and drafting documents.
A solicitor is required to indicate to a client what sorts of timelines are involved in each step of the proceedings and may explain the time gaps that may pass between contacts. Naturally, if a solicitor fails to contact a client after a reasonable period of time, the client should ask why a matter appears to be getting delayed.
The solicitor’s bill
A solicitor’s bill may be a lump sum amount, usually with a statement that the amount relates to all work carried out in relation to the matter or an itemised account of all of the work done. The solicitor’s bill must be signed by a legal practitioner or employee of the law practice concerned. Your lawyer also needs to send you a notice with the bill telling you about your rights to challenge legal costs (s 331 Legal Profession Act).
When a person receives a bill from their solicitor, they should carefully read it to ensure the bill is correct. Where the bill is provided as a lump sum amount, the client is entitled to ask the solicitor to reissue the bill as an itemised account. Your lawyer cannot charge you for doing this, and they must provide you with the requested itemised bill within 28 days of your request (s 332 Legal Profession Act). Significantly, if the solicitor then prepares an itemised account and it is higher than the original lump sum bill, the solicitor will normally be entitled to charge the higher amount.