Costs FAQs (2004 Act)
Disclosure of costs
Q. Are there clients I do not have to disclose costs to?
A. Yes, these are the 'sophisticated clients' – for the full list see s. 312(c)
Q. Is there a standard form of disclosure?
A. Yes, see the Precedents and forms section of this website. For the purposes of s. 309 (1) (b) (i)-(iii), (g), (i), (j) and (I) use Form 2 of Schedule 5 of the Legal Profession Regulation 2005
Q. What is the effect of a failure to disclose?
A. This is contained in s. 317. Note in particular s. 317 (4) which provides that on an assessment of the costs, the amount of the costs may be reduced by an amount considered by the costs assessor to be proportionate to the seriousness of the failure to disclose.
Q. Does the $750 threshold in s. 312 of the 2004 Act (under which disclosure is not required) include or exclude GST?
A. It excludes GST.
Q. Do I have to disclose costs to a client who waives the right to costs disclosure?
A. Not if you have disclosed the costs of the law practice in the previous 12 months and the client has agreed to waive disclosure and the principal of the law practice agrees (s. 312).
Q. Does the law practice need to disclose costs to a person who is not the client but who has agreed to pay costs, to the law practice, for the client (associated third party payer)?
A. Yes, but only to the extent that the matters disclosed are relevant to this person and relate to costs that are payable by this person.
Q. Do I have to disclose costs if the costs are capped or are under a scale?
A. Yes, the only exceptions are listed under s. 312 of the 2004 Act.
Q. Can I agree with my client that I calculate my costs according to the value of the transaction involved in the matter ego the price of the property in a conveyancing matter?
A. If the matter is non-litigious, that is okay.
Q. What is the effect of charging contingency fees in a litigious matter?
A. If litigation is involved and you charge in accordance with what is recovered in the proceedings, then you cannot recover from your client any costs and if the client has already paid you, you will have to repay your client.
Q. How can I estimate what the other side will charge in party/party costs if my client is not successful in the litigation?
A. You are only required to disclose an estimated range. Just your best estimate will do initially. You will need to give a more accurate estimate once you have obtained further information. Note that you have an obligation to continuously disclose.
Q. Is a matter a 'litigious matter', for the purposes of disclosure, if the matter is dealt with other than in a court or tribunal?
A. It would be reasonable to say that disclosure under s. 309 (1) (f) of the 2004 Act is required whenever a matter is dealt with in a statutory body which has the power to award costs.
Q. What will happen if I fail to disclose an estimate?
A. Under the 2004 Act, the client need not pay the costs unless they have been assessed. See s. 317 for other consequences of failure to disclose.
Q. Do I need to provide disclosure in statutory compensation matters dealt with in the Workers Compensation Commission where the client is not required to pay any costs?
A. Yes, the only exceptions are listed under s. 312 of the Act.
Q. I can't charge an uplift fee for matters involving a claim for damages. What if I do not know whether damages will be claimed at the time proceedings are commenced?
A. You will need to adapt your disclosure document to state that if a claim for damages eventuates then the uplift fee will not be charged.
Bills
Q. What has to be included in a bill?
A. A lump sum bill should describe the legal services provided and specifies the total costs.
An itemised bill has to comply with Regulation 111B of the Legal Profession Regulation 2005. It must enclose notification of client's rights in Form 3 of Schedule 5 of the Legal Profession Regulation 2005
Q. When can the client ask for an itemised bill?
A. There is no time limit for the client to ask for an itemised bill.
Q. I have agreed to charge my client a lump sum (e.g. for acting in a conveyancing matter) and not on an hourly rate basis, how can I provide an itemised bill?
A. Clause 111B of the Legal Profession Regulation 2005 provides for the contents of an itemised bill. Clause 111B(1)(d) does not require you to provide the amount charged for carrying out each item of work on an hourly rate basis. It allows you to show some other basis for charging and the particulars of that agreed basis. Thus clause 111B(1)(c) does not apply if the agreement is on a lump sum basis.
Q. When does the law practice have to provide the itemised bill?
A. Within 21 days.
Q. When can I commence proceedings to recover costs?
A. If you have served a lump sum bill, you will have to wait 30 days. If after you have commenced proceedings, the client asks for an itemised bill, there is nothing in the legislation concerning whether these proceedings may be maintained. However, the court has a discretion as to whether the matter should be stayed.
Q. Can the itemised bill be for a higher amount than the lump sum bill?
A. Yes, if the itemised bill replaces the lump sum bill. The question of whether the itemised bill actually replaces the lump sum bill is not specified in the 2004 Act. One view is that, provided the lump sum bill informs the client that the law practice reserves the right to amend the bill in the event of an itemised bill being requested or that the letters E & OE or similar expression is shown on the bill, then the itemised bill for a larger sum can be relied upon. It would of course still be subject to an assessor's discretion.
Q. Do I charge interest 30 days from the lump sum bill or the itemised bill?
A. If you are able to charge interest under s. 321, it should be in accordance with cl. 110A of the Legal Profession Regulation 2005, and calculated from 30 days after the lump sum bill. The rate of interest on unpaid legal costs, prescribed by clause 110A(3) of the Legal Profession Regulation 2005 is the Reserve Bank's cash rate target plus 2%. Refer to the RBA's website for details of current and historical cash rates at www.rba.gov.au/statistics/cash-rate.html.
Assessment
Q. Can I come to an agreement with the client that neither the client nor the law practice will apply for assessment?
A. Yes but only in accordance with s. 395A
Q. Clients only have 12 months to apply for assessment after the bill is given. Is that 12 months from the receipt of the lump sum bill or the itemized bill?
A. The question of whether the itemised bill replaces the lump sum bill or merely amends the lump sum bill is not clear. The Costs Assessment section of the Supreme Court of NSW has advised that the time limitation should run from receipt of the lump sum bill.
Q. Who pays for the costs of a costs assessment under the Supreme Court Scheme?
A. The law practice has to pay if there was a failure to disclose costs.
A party or parties to the litigation have to pay where costs are ordered by the court
The provider of the bill has to pay if the bill is reduced by 15% or more, subject to the assessor's discretion.
Q. Can the Supreme Court of NSW refuse to give the Certificate of Determination until the costs assessor's costs have been paid, even though neither the law practice nor the client is liable for those costs?
A. Yes, but you should discuss the problem with the Manager, Costs Assessment. If necessary, you should get instructions from your client whether it would be expedient for the client to pay those costs even though he or she may not be responsible for such payment.
Taking money for costs from the trust account
Q. How do I take money from the trust account for costs?
A. According to prescribed procedures under cl. 88 of the Legal Profession Regulation 2005.
CONTACT
- Legal Costs Unit
- The Law Society of NSW
- 170 Phillip Street
- Sydney NSW 2000
- DX 362 Sydney
- T: (02) 9926 0382
- F: (02) 9221 5804
- E: Marina Wilson
