Your Law Firm and You Costs, Disclosure and Fixed Legal Fees Cate - - PowerPoint PPT Presentation

Cate Dealehr

Accredited Costs Law Specialist

Principal ALCG - The Australian Legal Costing Group 11/ 313 La Trobe Street Melbourne 3000 cate@alcg.com.au

Your Law Firm and You

Costs, Disclosure and Fixed Legal Fees

OBJECTI VES

Ensure you are familiar and comfortable with your legal obligations as to legal fees when dealing with your clients. The why’s and how’s will be dealt in the following 4 sessions: Session 1: Examine the nature of the legal requirements under the Uniform Law re costs Session 2: Become familiar with the YLF fixed fee costs agreement Session 3: Identify the issues around the importance of communicating with your clients about costs Session 4: Provide a framework for you to budget and otherwise calculate the amount for fixed professional fees

SESSI ON 1 - LEGAL REQUI REMENTS Legal Profession Uniform Law - LPUL

LPUL applies to all Victorian and NSW lawyers from 1 July 2015 Part 4.3 – Legal Costs Consumer focused legislation

s 172(1)&(2) CRI TERI A FOR CHARGI NG Costs to be proportionate and reasonable

(1) A law practice must, in charging legal costs, charge costs that are no more than fair and reasonable in all the circumstances and that in particular are— (a) proportionately and reasonably incurred; and (b) proportionate and reasonable in amount. (2) In considering whether legal costs satisfy subsection (1), regard must be had to whether the legal costs reasonably reflect— (a) the level of skill, experience, specialisation and seniority of the lawyers concerned; and (b) the level of complexity, novelty or difficulty of the issues involved, and the extent to which the matter involved a matter of public interest; and (c) the labour and responsibility involved; and (d) the circumstances in acting on the matter, including (for example) any or all of the following— (i) the urgency of the matter; (ii) the time spent on the matter; (iii) the time when business was transacted in the matter; (iv) the place where business was transacted in the matter; (v) the number and importance of any documents involved; and (e) the quality of the work done; and (f) the retainer and the instructions (express or implied) given in the matter. Compliance tip: Although the Civil Procedure Act 2010 could be used as a guide, there is an important distinction that the amount in dispute is not a factor under LPUL but it is under CPA!

CRI TERI A FOR CHARGI NG Costs to be Fair & reasonable

(3) In considering whether legal costs are fair & reasonable, regard must also be had to whether the legal costs conform to any applicable requirements of this Part, the Uniform Rules and any fixed costs legislative provisions. * (4) A costs agreement is prima facie evidence that legal costs disclosed in the agreement are fair & reasonable if: (a) the provisions of Div 3 relating to costs disclosure have been complied (costs disclosure); and (b) the costs agreement does not contravene, and was not entered into in contravention of, any provision of Div 4 (costs agreements).

s 172(3)&(4)

LPUL: Fair and reasonable now applicable to all costs reviews and not just those not covered by costs

• agreements. Issue of proportionality new and expanded factors to include the level of skill, experience,

specialisation and seniority of lawyers and whether matter of public interest.

*(see definition of fixed costs legislative provisions at Section 6 of LPUL – includes determination, scale, arrangement or other provision, fixing the costs or max costs of any legal services that is made by or under the UR or any other legislation)

Compliance tip: each and every disclosure statement needs to be customised to the particular circumstances of the case as it is presented at the time; write to client about risks with reference to costs consequences and the quantum/importance of claim and keep the client updated as the circumstances change

CRI TERI A FOR CHARGI NG Avoidance of increased legal costs

A law practice must not act in a way that unnecessarily results in increased legal costs payable by a client, and in particular must act reasonably to avoid unnecessary delay resulting in increased legal costs.

s 173

LPUL: Explicit reference to obligations of practitioner to avoid delay and to not act in a way to increase costs. Compliance tip: using the Civil Procedure Act 2010 as a guide:

• 1. direct clients towards taking reasonable action that results in efficient & timely

resolution of the matter;

• 2. use reasonable endeavours to act properly and minimise delays

Identification of most important disclosures – These are:

s 174(1) DI SCLOSURE Main disclosure obligations

→ Basis on which legal costs will be calculated → Estimate of total legal costs → Where significant change to earlier disclosure made under 174(1) then as soon as practicable, info about any significant change to legal costs to be paid by client (174(1)(b)) Law practice must take all reasonable steps to satisfy itself that client has understood and given consent to proposed course of action for conduct of matter and proposed costs (174(3)) Identification of additional disclosures – These are the client’s rights to:

s 174(2) Additional disclosures

→ Negotiate a costs agreement → Negotiate a billing method (e.g. reference to timing or task) → Receive a bill → Request an itemised bill → Seek assistance of Legal Services Commissioner in event of costs dispute

On-going disclosure in a fixed fee regime where professional fees are fixed would include where the costs increase significantly due to an increase in disbursements and therefore the total legal costs.

s 174(1)(b) DI SCLOSURE Ongoing disclosure obligations

LPUL: Information under 174(1)(b) must include sufficient and reasonable amount of information about impact of the change on the legal costs that will be payable as to allow client to make informed decision about future conduct of matter (174(2)(b)); Law practice must take all reasonable steps to satisfy itself that client has understood and given consent to proposed course of action for conduct of matter and proposed costs (174(3))

Information under 174(1)(b) (re any significant change) must include sufficient and reasonable amount of information about the impact the change will have on the legal costs that will be payable as to allow client to make an informed decision about the future conduct of the matter

s 174(2)(b) DI SCLOSURE Consent & Understanding

Law practice must take all reasonable steps to satisfy itself that the client has understood AND given consent to the proposed course of action for conduct of the matter and proposed costs as disclosed under 174(1)(a) (basis for charging and estimate of total legal costs)

s 174(3)

LPUL: need for steps to be taken to ensure informed consent obtained Compliance tip: explain costs implications of proposed course of action to client, ensure the client signs to signify they understand and agree to the course of action; not a ‘set and forget’ consent but requirement for constant information flow from the law practice regarding costs; recommend also seeking signature to signify understanding and consent to costs implications of next steps when significant change triggers update

DI SCLOSURE Written disclosure

A disclosure under this section must be made in writing, but the requirement for writing does not affect the law practice's obligations under subsection (3) (i.e. client’s consent & understanding)

s 174(6)

LPUL: Disclosure must be in writing but this does not affect obligations under s 174(3) that client needs to understand and to consent Compliance tip: written disclosure of itself is not enough, still need client to understand and accept; if client does not have sufficient command of the English language, use interpreter or give disclosure in the appropriate language (1) If a law practice (the first law practice) intends to retain another law practice (the second law practice ) on behalf of a client, the first law practice must disclose to the client the details specified in section 174(1) in relation to the second law practice, in addition to any information required to be disclosed to the client under section 174. LPUL: Need to disclose all matters under s 174(1) (basis for charging, total legal costs)

Disclosure obligations where another law practice retained s 175

Compliance tip: take initiative and send barrister (i.e. 2nd law practice) a pro forma disclosure document to fill out and return (see YLF precedent); discuss costs upfront and manage workload by limiting retainer, if appropriate; discussing a budget is another

• ption with the barrister. Should be in writing

DI SCLOSURE Non-Compliance with disclosure obligations

If a law practice contravenes disclosure requirements of Part 4.3 then effect is: → Costs agreement concerned (if any) is VOID (178(1)(a) → Client/ATPP not required to pay legal cost until costs assessed or any costs dispute determined Legal Services Commissioner (178(1)(b)) → Law practice cannot commence or maintain cost recovery proceedings until costs or any costs dispute has been determined by designated local regulatory authority or under jurisdictional legislation (178(1)(c)) → Contravention can constitute unsatisfactory professional conduct or professional misconduct (178(1)(d))

s 178

UR 72A

Anti-Voiding Rule: Disclosure non compliance will not result in costs agreement being void provided: a) Non-intentional b) Non-substantial i.e. not affect client’s decision to instruct lawyer or exercise informed consent c) Objectively not affect client d) Lawyer has taken steps to comply with disclosure obligations on first instance and upon becoming aware of non-compliance rectifies mistake within 14 days LPUL: No provision to identify what happens if void costs agreement and what happens if no costs agreement. Assume fall back position is in s 172 – “fair & reasonable”

COSTS AGREEMENTS Written offer: provision when costs agreements not signed

A costs agreement may consist of a written offer that is accepted in writing or (except in the case of a conditional costs agreement) by other conduct

s 180(3)

LPUL: Conduct need not be defined in writing. Costs agreement still needs to be in writing (s 180(1)) Compliance tip: may still be prudent to state type of conduct that constitutes acceptance. Best practice is to get client to sign costs agreement

COSTS AGREEMENTS Certain costs agreements void

(1) A costs agreement that contravenes, or is entered into in contravention of, any provision of this Division is void.

s 185

LPUL: → No provision to identify what happens if void costs agreement and what happens if no costs

• agreement. Fall back position is therefore fair & reasonable + proportionate (s 172)

→ Costs must be assessed before a law practice is entitled to recover costs (see s 178(1)(b)) → Law practice in contravention of s182 (uplift fees) not entitled to uplift fee and must repay uplift fees (185(3)) → Law practice in contravention of s183 (contingency fees) not entitled to uplift fee and must repay all fees received(185(4)) → Law practice could be sued by client for monies paid under 185(2)-(4) where costs agreement held to be void (185(5))

BI LLI NG Request for itemised bill

(1) If a bill is given by a law practice in the form of a lump sum bill, any person who is entitled to apply for an assessment of the legal costs to which the bill relates may request the law practice to give the person an itemised bill. (2) A request for an itemised bill must be made within 30 days after the date on which the legal costs become payable. (3) The law practice must comply with the request within 21 days after the date on which the request is made in accordance with subsection (2).

s 187

LPUL: Request for itemised bill is to be within 30 days from date which legal costs become payable

UR 74

Note: Given YFL is a fixed fee model, then UR 74 not apply as not able to exceed fixed fee (1) If the total amount of the legal costs specified in an itemised bill given by a law practice exceeds the amount previously specified by the law practice in a lump sum bill for the same matter, the additional costs may be recovered by the law practice only if: (a) when the lump sum bill was given, the law practice made an appropriately worded disclosure in writing to the client indicating that the total amount of the legal costs specified in any itemised bill may be higher than the amount specified in the lump sum bill, and (b) the costs are determined to be payable after a costs assessment or after a binding determination under s 292 of the LPUL (2) This rule does not affect the operation of any costs agreement in relation to a matter.

BI LLI NG Responsible principal to sign bills

(1) A bill given by a law practice, or a letter accompanying the bill, must— (a) be signed by a principal of the law practice designated in the bill or letter as the responsible principal for the bill; or (b) nominate a principal of the law practice as the responsible principal for the bill. (2) If a principal does not sign or is not nominated as the responsible principal for a bill given by a law practice, each principal of the law practice is taken to be a responsible principal for the bill.

s 188

LPUL: Bill must be signed by principal designated as responsible principal or nominee or if no signature or nomination, then each principal is deemed responsible principal Compliance tip: to avoid need for signature on a bill, nominate the principal responsible for the bill

BI LLI NG Giving bills

A bill is to be given to a client in accordance with the Uniform Rules.

s 189

compliance tip: ensure costs agreement provides for the giving of bills electronically

(1) For the purposes of section 189 of the Uniform Law, a bill given by a law practice to a client is to be given: (a) by personal delivery to the client or an agent of the client (b) by sending it by post to the client or an agent of the client (c) by leaving a copy of the bill, addressed to the client (d) in the case of a client whose address includes a DX address in Australia—by leaving a copy of the bill, addressed to the client, in the DX box at that address or in another DX box for transmission to that DX box; or (e) in the case of a client who has consented to receiving bills by means of a fax sent to a fax number specified by the client—by faxing a copy of the bill, addressed to the client, to that fax number; or (f) in the case of a client who has consented to receiving bills sent electronically to the client or an agent of the client by means of: (i) the client’s usual email address or mobile phone number (or another email address or mobile phone number specified by the client)—by transmitting the bill electronically, addressed to the client, to that address or number; or (ii) different arrangements agreed to by the client or an agent of the client—by transmitting the bill electronically in accordance with those arrangements; or (g) in the case of service on a corporation—by serving a copy of the bill on the corporation in any manner in which service of a notice or document may, by law, be served on the corporation.

UR 73

BI LLI NG Giving bills

A law practice must not make a charge for preparing or giving a bill, and any charge made for that purpose is not recoverable by the law practice

s 191

LPUL: not a disclosure requirement to advise of avenues for dispute and time limits but still must be included on bills

s 192

Compliance tip: make sure to include the recommended notification of rights, which is included in the YLF precedent invoices A law practice must ensure that a bill includes or is accompanied by a written statement setting out— (a) the avenues that are open to the client in the event of a dispute in relation to legal costs; and (b) any time limits that apply to the taking of any action referred to in paragraph (a).

COSTS ASSESSMENT Factors in an assessment in the event of a costs dispute

(1) In considering whether legal costs for legal work are fair and reasonable, the costs assessor must apply the principles in s172 so far as they are applicable. (s 172 relates to fair & reasonable & proportionality) (2) In considering whether legal costs for legal work are fair and reasonable, the costs assessor may have regard to the following matters— (a) whether the law practice and any legal practitioner associate or foreign lawyer associate involved in the work complied with this Law and the Uniform Rules; (b) any disclosures made, including whether it would have been reasonably practicable for the law practice to disclose the total costs of the work at the outset (rather than simply disclosing charging rates); (c) any relevant advertisement as to the law practice's costs or the skills of the law practice or any legal practitioner associate or foreign lawyer associate involved in the work; (d) any other relevant matter. (3) The costs assessor must take into account the incidence of GST in a costs assessment. (4) In conducting an assessment of legal costs payable by a non-associated third party payer, the costs assessor must also consider whether it is fair and reasonable in the circumstances for the non-associated third party payer to be charged the amount claimed.

s 200

Reasons to be given: On a costs assessment, a costs assessor must provide reasons for the costs assessment, and may determine the form in which reasons are given.

s 201

DI SCI PLI NARY MATTERS Referral for disciplinary action

On a costs assessment, a costs assessor — (a) may refer a matter to the Legal Services Commissioner if the costs assessor considers that the legal costs charged are not fair and reasonable; and (b) must refer a matter to the Legal Services Commissioner if the costs assessor considers that the legal costs charged, or any other issue raised in the assessment, may amount to unsatisfactory professional conduct or professional misconduct.

s 202

LPUL: Mandatory provisions to refer matter where possible disciplinary breaches; non-mandatory where legal costs not fair & reasonable.

DI SCI PLI NARY MATTERS Unreasonable legal costs – disciplinary action

(1) A contravention of a requirement of this Part that a law practice must not charge more than fair and reasonable legal costs is capable of constituting unsatisfactory professional conduct or professional misconduct on the part of— (a) the responsible principal or principals for a bill given by the law practice (see section 188); and (b) each legal practitioner associate or foreign lawyer associate who was involved in giving the bill or authorising it to be given. (2) Subsection (1) applies to a responsible principal— (a) whether or not he or she had actual knowledge of the bill or its contents; and (b) whether or not he or she had actual knowledge that the legal costs were unfair or unreasonable (3) However, subsection (1) does not apply to a responsible principal if he or she establishes that it was not reasonable for him or her to suspect or believe that the legal costs in the bill were unfair or unreasonable in the circumstances (otherwise than by the mere assertion of someone else involved in the law practice).

s 207

LPUL: Legal Practice must not charge more than fair and reasonable legal costs and capable of disciplinary action on the part of the responsible principal

SUMMARY

Uniformity Across two States VCAT not available as venue to set aside costs agreements Positive duty on lawyers to keep costs proportionate and avoid increased legal fees Where failure to disclose the result is the costs agreement is void Where significant change to ongoing estimates – positive requirement to provide sufficient and reasonable impact of change to legal costs – Positive duty to be satisfied client understood and consented to proposed course

• f action and proposed costs. This applies to fixed fees in relation to disbursements

Costs review not available for commercial/government clients (includes other lawyers) Timetable for lawyers to dispute counsel’s fees is the same as for clients to dispute lawyers (60 Days - 12months) Responsible principal can be subject to discipline proceedings where unreasonable fees – even if not operator Legal Services Commissioner can mediate disputes under $100,000 & determine disputes of $10,000

Cate Dealehr

Accredited Costs Law Specialist

Principal ALCG - The Australian Legal Costing Group 11/ 313 La Trobe Street Melbourne 3000 cate@alcg.com.au