Costs disclosure obligations and consequences of not complying: part 2

This is part 2 of a serialisation of a paper I gave on costs disclosure obligations under the Legal Profession Act, 2004 and the consequences of not complying.  Part 1 is here.  This post is not exhaustive of the answers to the question ‘To whom need disclosures not be given?’  For more answers to that question, see subsequent posts.

To whom need disclosures not be given?

Some but not all of the costs disclosure requirements need not be given in certain circumstances.  The exceptions do not apply to disclosure requirements upon settling litigation, to the provision of progress reports, or to bill disclosures. The Act speaks of all clients’ ‘right to obtain reasonable information’ in relation to the matters which are required to be disclosed by s. 3.4.9 (that is, the principal costs disclosures required to be made by solicitors at the start of the retainer), even if the law firm is not excepted from the obligation voluntarily to disclose it: s. 3.4.12(5)(b).

The class of persons to whom costs disclosures need not be given is not the same as the class of ‘sophisticated clients’; it is wider. ‘Sophisticated client’ is defined by s. 3.4.2 to mean the class of person described in ss. 3.4.12(1)(c) and (d), two of the provisions specifying classes of person to whom disclosures need not be given.  They are described under the sub-headings below and in a subsequent post, ‘Tenders’ and ‘Classes of client’.[1] In addition to them, disclosures need not be made to clients who have agreed to waive their rights to disclosure, pro bono clients, and certain classes of clients prescribed by regulation.

Bill disclosures must accompany all bills (s. 3.4.35), except those addressed to sophisticated clients: sub-section (2).  People often forget to put the disclosures on bills of costs in taxable form, and I have seen it argued that such bills are not ‘given’ if they do not have disclosures accompany them any more than a lump sum bill given at first instance is given if unaccompanied by the disclosures.

When pleading an allegation of non-disclosure, I plead out the facts which take the solicitor-client relationship outside the classes of excepted relationship.

The paragraph numbering below is to sub-paragraphs of s. 3.4.12(1), and what follows are the cases where costs disclosure need not be given.

Fees less than $750

No costs disclosures have to be given for so long as the estimated total legal costs of the matter, excluding disbursements, are $750 or less: s. 3.4.12(1)(a) and sub-section (2).

‘Legal costs’ are defined to mean:

‘amounts that a person has been or may be charged by, or is or may become liable to pay to, a law practice for the provision of legal services including disbursements but not including interest.’ (s. 1.2.1)

Whether counsel’s fees are disbursements or not for the purposes of various provisions has been a surprisingly vexed topic over time.[2] I remain unsure, but would err on the side of assuming that likely counsel’s fees are counted towards the $750 limit.

Client waiver

Law firms need not make costs disclosures to existing clients who have been given disclosures within the last year and who have agreed in writing to waive their rights to further disclosures.  But only if a partner ‘decides on reasonable grounds that, having regard to the nature of the previous disclosures and the relevant circumstances, the further disclosure is not warranted’: s. 3.4.12(1)(b).   A written record of such a decision must be made and placed on the solicitor’s file, and the Act goes out of its way to say that the reaching of a decision that further disclosure is not warranted on grounds other than reasonable grounds may amount to unsatisfactory professional conduct or professional misconduct: sub-ss. (3) and (4).

I am unaware of any law on this provision, and so I would use it only in those situations where to give disclosure after disclosure to the same person within the same client in relation to essentially the same recurring matter to be conducted by the same person at the same rates and much the same cost would be to succumb to nonsensical bureaucracy. Why buy into the issue of the reasonableness of derogation from the Act where getting it wrong may have disciplinary consequences for the person concerned and the partners, and when compliance with the Act is easy enough?


Costs disclosures need not be given

(d) if the legal costs or the basis on which they will be calculated have or has been agreed as a result of a tender process.

Pro bono etc.

Costs disclosures need not be given

(e) if the client will not be required to pay the legal costs or they will not otherwise be recovered by the law practice.

Note that ‘legal costs’ includes disbursements: s. 1.2.1.  Many modern pro bono retainers used by large firms require the client to pay hard disbursements, so that the exception may be inapplicable.

I would suggest that by virtue of the second limb of this exception, it would not be available in that species of pro bono retainer in which the law firm is entitled to recover fees if the client is entitled to recover from the other side in litigation pursuant to the rules of the court (e.g. of and incidental to amendment) or pursuant to a court order, and only to the extent of such recovery.  (In relation to this kind of retainer, incidentally, see Wentworth v Rogers [2006] NSWCA 145; (2006) 66 NSWLR 474.)

[1] In fact, the section headed ‘Classes of client’ describes a slightly larger class, in that it includes persons to whom disclosure need not be given by virtue of sub-para (f), which says disclosure need not be given to classes of person prescribed by regulation.

[2] See Bhalla v Wisewoulds, unreported, Legal Profession Tribunal, T1010 of 1999; Dimos v Hanos [2001] VSC 173; Coady’s v Getzler [2006] VCC 1838; Equuscorp Pty Ltd v Wilmoth Field Warne [2006] VSC 28, [53].

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