Cost Law Commentary

Issues in the Legal Profession Uniform Law

My Queen’s Birthday weekend has largely been spent in undertaking a further review of the Legal Profession Uniform Law and Rules, which in turn has highlighted a number of issues.

Commercial or government clients

At first blush, it appears that commercial or government clients have no rights, pursuant to the law, if they are unhappy about legal costs. The explanatory memorandum stated that

“the majority of the consumer protection provisions in Part 4.3 do not apply to commercial or government clients (as defined in the section) or a third party payer who would be a commercial or government client if the third party payer were a client of the law practice concerned. The entities falling within the definition of commercial or government client are generally large commercial operators or government entities and are likely to be repeat purchasers of legal services.”

However it is still open to a commercial or government client to make a costs complaint to the Victorian Legal Services Commissioner pursuant to Part 5.2 of the act. Admittedly, such complaints are limited to matters where the total costs are less than $100,000, or where the amount in dispute is less than $10,000, and the total costs are greater than $100,000. Such clients can also apply to VCAT, as I explain further below.

Provision of a range of estimates

One of the principal concerns for practitioners is s 174(1)(a) which, unlike the equivalent provision in the legal profession act, requires disclosure of an estimate of the total legal costs. There is no longer a reference to the ability to provide a range of estimates. However, s 182(3)(b) allows the practitioner to give a range of estimates of an uplift fee (when uplift fees being charged as part of the conditional cost agreement). Given that uplift fees are generally calculated as a percentage of the usual legal costs, this appears to be inconsistent with the requirement to provide a single estimate of total costs.

Impact on solicitors of failure by counsel to properly disclose

S 3.4.17(5) of the Legal Profession Act protected solicitors from the consequences of counsel’s failure to provide sufficient information to enable the solicitor to make proper disclosure to the client about counsel’s fees, or where counsel’s fees exceeded the amount in counsel’s estimate of likely fees.

In other words, if counsel underestimated his or her fees, and the solicitor rendered an invoice to the client including counsel’s fees higher than had originally been estimated, or if counsel failed to provide any disclosure and the solicitor included counsel’s fees and in invoice to the client, the solicitor was protected from the consequences of failure to disclose in relation to his or her own fees.

There is no equivalent provision in the Uniform Law. This may be an oversight, as originally the definition of total legal costs excluded GST and disbursements, and the main disclosure requirement in s 174(1)(a) required disclosure of an estimate of total legal costs, which, on the basis of the original definition in s 174(9) would have effectively meant just the solicitor’s fees.

However, s 174(9) has been repealed, and the definition of legal costs in s 6 specifically includes disbursements. Therefore the solicitor must now disclose an estimate of total legal costs which includes counsel’s fees. Given that a contravention of the disclosure obligations results in a cost agreement being void (s 178(1)(a)), there is now a significant obligation on the solicitor to ensure that counsel makes proper disclosure, and that the fees rendered by counsel do not exceed the estimate of total legal costs in any disclosures made by counsel.

Notice of rights on the invoice

S 192 requires that a bill must include all be accompanied by statement setting out the clients rights in the event of a dispute in relation to the legal costs and the time limits applying. This obviously would include the right to seek a cost assessment and the right to make a costs complaint to the relevant state Commissioner.

Given that one of the principal objectives of the Uniform Law is to provide consistency across the participating states and territories, it was to be expected that such a notice could be certain sufficiently general to apply to all matters, irrespective of where the work was being undertaken.

However, section 99 of the legal profession Uniform Law Application Act 2014 (Victoria) provides that VCAT can determine cost disputes if the total amount in dispute is no more than $25,000. There is no equivalent provision in the New South Wales legislation. Query whether the notice of this avenue of dispute is required to be provided, given that the right only arises after a costs complaint has been made to the Victorian Commissioner, which dispute cannot be dealt with by the Commissioner, and the Commissioner has advised the parties of their right to make application to vacate. In other words, it appears that the right to make application to fee cat only arises after a costs complaint has been made to the Commissioner.

The Victorian Commissioner has jurisdiction: 1. Where the total bill is less than $100,000; and 2. Where the total bill is equal to or more than $100,000 but the total amount in dispute is less than $10,000. The Commissioner can only determine disputes where the total amount in dispute is less than $10,000. VCAT’s jurisdiction is where the total amount in dispute is not more than $25,000. Therefore, if a client is disputing a bill greater than $100,000 and the amount of dispute is greater than $10,000 but less than $25,000, it will be necessary for the client to lodge a costs complaint with the Victorian Commissioner, the Victorian Commissioner to process this complaint and identify that he does not have jurisdiction because the amount in dispute is greater than $10,000, and then give notice to the client of their right to apply to VCAT to determine the dispute.

Query if the notice of rights needs to specifically address this.

It is be hoped that these issues will be addressed in the next couple of weeks before the Law takes effect. The Legal Services Commissioner and state Commissioners could provide direction in relation to matters such as the notice on the bill, and the ability to provide a range of estimates. Other matters will require legislative amendment.