Cost Law Commentary

The Legal Profession Uniform Law Part 3:

This is part 3  in a series reviewing the Legal Profession Uniform Law (LPUL), which is expected to take effect in Victoria and New South Wales on 1 July 2015.  The first part considers cost agreements.  The second part deals with disclosure. Bills of Costs

A bill may be in lump sum or itemised form and a client may request an itemised bill. However, the time for such a request is different to previously, in that a request must be made within 30 days “after the date on which the legal costs become payable”. Reference therefore may need to be had to the terms of the cost agreement as to when the costs are due and payable. The request must be complied with within 21 days of the date of the request.

Section 188 provides that bills or a letter accompanying the bill must be signed by a principal of the law practice. This raises practical issues for small firms and sole practitioners, unless an electronic signature is deemed compliant. It is important to note that s 194 prevents a law practice from commencing proceedings to recover legal costs until a bill is given, which bill complies with the requirements of the Uniform Law and Rules.

Charging for preparation of bills is prohibited, with no exception for bills provided to non associated third parties.[1]

The bill continues to require a notice in relation to the avenues open to the client in the event of a dispute and time limits applying[2].

Proceedings to recover costs cannot be commenced until at least 30 days after the bill is given or the date on which the person receives an itemised bill following a request for same. Note the reduction from 65 days in the Legal Profession Act 2004.

However, Section 194(2) reiterates that a law practice must not commence legal proceedings to recover legal costs until a costs dispute to the LSC is finalised. S 199(7)(b) provides that a law practice may not commence proceedings to recover costs until a cost assessment has been completed, but a cost assessment does not stay proceedings which have been commenced. Given that the validity of a cost agreement is to be determined by the costs assessor, in addition to the determination of costs to be paid, it is obvious that there could be substantial overlap between matters to be dealt with in cost recovery proceedings, and matters to be considered by a Taxing Officer.

The means of giving of a bill will be determined by the Uniform Rules[3].

Time Frames re challenges to bills

  • Request for itemised bill – 30 days after costs become payable
  • Delivery of itemised bill– 21 days of request
  • Commencement of proceedings – 30 days from giving bill or itemised bill (where requested), but not if cost complaint made
  • Application for cost assessment – within 12 months of giving of bill, or request for payment, or of payment if no bill or request made.
  • Cost Complaint to LSC – 60 days after costs become payable or 30 days after itemised bill given pursuant to request.
  • Extension of time for cost complaint – within 4 months of time for making a costs complaint (i.e. 6 months of costs becoming payable or 5 months after itemised bill), but not if recovery proceedings commenced.

Interest on Costs

Unless there are provisions in the cost agreement in relation to interest, interest only runs if the costs are unpaid 30 days or more after the bill is given.[4]

A bill must contain a provision in relation to entitlement to interest. Interest is not chargeable if this statement is not endorsed on the bill and the statement needs to include the rate of interest.[5] The maximum interest rate is determined by the Uniform Rules.[6]

An interesting new provision is the law practice must not charge interest on a bill given more than six months after the completion of the matter[7]. This provision does not apply if the bill was not issued within the six-month period at the request of the client. This is particularly relevant to counsel as it could be argued that, in respect of counsel, the matter is concluded when counsel’s involvement ceases, which could be many months prior to the actual finalisation of the matter.

[1] S 191

[2] S 192

[3] S 189

[4] S195(1) and (2)

[5] S 195(3)

[6] S 195(4)

[7] S 195(5)