Costs disclosure obligations and consequences of not complying: part 4

This is part 4 of a serialisation of a paper I gave on about costs disclosure obligations and the consequences of not complying.  Parts 1, 2, and 3 are here, here, and here.  This post begins to answer the question ‘What must be disclosed’.  The balance of the answers to that question is to be found in instalments yet to come.

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What must be disclosed?

Costs disclosures

The costs estimates

Section 3.4.9(1)(c) requires the provision of:

‘an estimate of the total legal costs or, if that is not reasonably practicable-

(i) a range of estimates of the total legal costs; and

(ii) an explanation of the major variables that will affect the calculation of those costs’.

There is not a lot of law on this provision,[1] but in Casey v Quabba [2005] QSC 356, the statement ‘it is estimated the possible range of fees and costs recoverable will be between nil and $250,000 (approximately)’ did not satisfy the NSW correlate of s. 3.4.9(1)(c) as not being a ‘genuine attempt to inform the client as required by the [correlate provision].’  The case was reversed on appeal on a different point.

Also relatively unexplored is the extent to which it is permissible to limit retainers to stages of a ‘matter’.  So, for example, a retainer may define the work to be done as that necessary to achieve post-discovery mediation, or just the work necessary to draft, file, and serve originating process.  Absent such a consensual limitation, the estimate ought contemplate both the best and worst case scenarios for the ‘matter’ the subject of the retainer, i.e. the costs of arriving at a point where settlement might be achieved because the solicitor knows enough about the case to be able to provide advice as to settlement (best reasonable case) and to the end of a contested trial with as many joined parties and counterclaims as may be in contemplation as possibilities (worst reasonable case).

(b)           The principal initial disclosures

Section 3.4.9(1) requires the following disclosures in all matters:

(b) The client’s right to-

(i) negotiate a costs agreement with the law practice;[2] and

(ia) receive a bill from the law practice; and

(ii) request an itemised bill within 30 days after receipt of a lump sum bill.

(h) The client’s right to written progress reports upon reasonable request in relation to the progress of the matter and in relation to the costs to date of the matter;

(j) The availability of, and the time limits applicable to: what used to be called taxation[3], applications to set aside costs agreements, and making complaints to the Legal Services Commissioner (e.g. disciplinary complaints for gross overcharging and that species of civil complaints that used to be called costs disputes);

(m) Information about the client’s right to choose a different law [principally applicable, presumably, where the client is interstate].

The  disclosures above, under this sub-heading (b) are taken to have been made if disclosures in the following form are made, but use of the form is not mandatory (and is, for some reason, uncommon):

Legal Profession Act 2004 Legal costs-your right to know

You have the right to-

  • Negotiate a costs agreement with us
  • Receive a bill of costs from us
  • Request an itemised bill of costs within 30 days after you receive a lump sum bill from us
  • Request written reports about the progress of your matter and the costs incurred in your matter
  • Apply for costs to be assessed within 12 months if you are unhappy with our costs
  • Apply for the costs agreement to be set aside
  • Make a complaint to the Legal Services Commissioner. This includes making a complaint that involves a civil dispute to the Legal Services Commissioner within 60 days after the legal costs were payable or, if an itemised bill was requested in respect of those costs, within 30 days after the request was complied with
  • Accept or reject any offer we make for an interstate costs law to apply to your matter
  • Notify us that you require an interstate costs law to apply to your matter

For more information about your rights, please read the fact sheet entitled Legal Costs-Your Right to Know. You can ask us for a copy, or obtain it from the Legal Services Commissioner (or download it from their website).’

The Commissioner’s fact sheet is here.  (See also the fact sheet ‘Your Right to Challenge Legal Costs’, available here.)

The following disclosures are required in all matters as well, but there is no form prescribed in respect of them:

(a) The basis on which legal costs will be calculated, including

(a) whether a practitioner remuneration order [e.g. the Practitioners Remuneration Order (PRO), formerly known as the SRO] or scale of costs [e.g. the County Court scale of costs appended to the Rules of Civil Procedure] applies to any of the legal costs.

(b)(iii) The client’s right to be notified of any substantial change to the matters disclosed under section 3.4.9.[4]

(e) Details of the intervals (if any) at which the client will be billed.

(f) The rate of interest (if any) that the law practice charges on overdue legal costs, whether that rate is a specific rate of interest or is a benchmark rate of interest [the maximum interest chargeable is a benchmark rate plus 2%, namely the Reserve Bank’s Cash Target Rate; as to interest more generally, see below].

(i) Details of the person whom the client may contact to discuss the legal costs.

(l) That the law of Victoria applies.

Section 3.4.9(1)(g) additionally requires disclosure in all ‘litigious matters’[5] of an estimate of:

(i) The range of costs that may be recovered if the client is successful in the litigation.

(ii) The range of costs the client may be ordered to pay if the client is unsuccessful.

[1] The 1996’s Act’s provision was s. 86.  Research may be conducted against the following correlates in other states: Legal Profession Act, 2006 (ACT) s. 269, Legal Profession Act, 2004 s. 309 (formerly Legal Profession Act, 1987 (NSW) s. 175), Legal Profession Act, 2006 (NT) s. 303, Legal Profession Act, 2007 (Qld) s. 308, Legal Profession Act, 2007 (Tas) s. 291, Legal Profession Act, 2008 (WA) s. 260.  Links to these statutes are at my blog, here.

[2] This makes obvious why the disclosure statement and costs agreement should be two separate things.

[3] Note that it is permissible to contract out of obligations under Division 7 of Part 3.4 of the 2004 Act, which deals with what used to be called taxation, with sophisticated clients and associated third party payers who would be sophisticated clients if they were clients: s. 3.4.48A.  Should that have occurred, then it is obviously undesirable to advise them of the availability of rights which they have contracted out of.

[4] Why the disclosure is limited to the right to be notified of changes to matters disclosed under s. 3.4.9 is puzzling given that s. 3.4.16 (the notification of changes provision) does not appear to be limited to disclosures under s. 3.4.9.

[5] The term is undefined.

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