Costs FAQs

A solicitor has a right to have a barrister’s bill assessed within a period of 60 days. If the solicitor passes up this opportunity and the client subsequently obtains a reduction in its liability to the solicitor for the barrister’s fees, the solicitor may be left solely responsible to pay the barrister the amount of the reduction.

Engagement of the barrister results in a contract between the barrister and solicitor.¹ The barrister’s fees are usually included in the solicitor’s invoices to the client as a disbursement. The solicitor has a right of indemnity against the client for these fees.²  

The solicitor is entitled to bring a costs application against the barrister for assessment of the barrister’s costs.³ The client may also have the barrister’s fees assessed, by bringing a costs application in relation to the solicitor’s bill containing the barrister’s fees as a disbursement.⁴ Consequently, a client may be liable to pay the solicitor a different sum to that owed by the solicitor to the barrister due to reductions for the conduct of the solicitor. 

The solicitor must bring its costs application within 60 days.⁵ No provision is made within the Legal Profession Act 2007 (Qld) (‘LPA’) for extending this period. The client has, however, a significantly longer period - 12 months - to bring its costs application.⁶  

This can produce a scenario where a barrister submits an invoice to the solicitor, and the solicitor does not apply to have it assessed within the 60 days permitted. At this point the solicitor is contractually liable to the barrister for 100% of the fees, without further recourse to assessment. The client, however, may, after the 60 days has elapsed but within the 12 months permitted to it, bring a costs application. This could result in a reduction of the fees payable by the client. The client is now liable to the solicitor for he reduced amount while the solicitor remains liable for 100%. The client does not have standing to apply on behalf of the solicitor to have the fees reduced as between the solicitor and barrister. 

This interpretation of the costs sections of the LPA is based on three Victoria cases⁷ which addressed materially similar Victoria legislation. To date, the Queensland courts have not addressed the issue. 

To avoid becoming caught in this situation, solicitors should consider the following:

• When briefing a barrister, ensure that the barrister has complied with their disclosure obligations to the solicitor’s law practice,⁸ and that the solicitor has complied with its disclosure obligations with respect to the barrister’s fees to the client.⁹
• Scrutinise the barrister’s proposed terms of engagement for any unusual terms such as attempts to contract out of assessment,¹⁰ or cancellation fees. Bring these expressly to the attention of the client.
• When the barrister renders a fee note – check it. Seek an itemised bill, if necessary. Remember the 60 day time limit for assessment. If not assessed, then if the client subsequently seeks to assess the solicitor’s bill (which will include counsel’s fee as a disbursement) and the fee charged by counsel is reduced, the solicitor may be out of pocket.

Having frank conversations with the client about these matters is key, as is keeping on top of the tracking and supervision of the costs process. 

1 Under s 322 of the Legal Profession Act 2007 (Qld) relations between solicitor and barrister are contractual. The barrister’s fee which in former times was an honorarium, with no legal obligation to pay, is now a contractual obligation, provided of course a valid costs agreement exists. A contract directly between a client and barrister may also be created with the specific agreement of those parties (under s 322(1)(b)). For further details see Bar Association of Queensland.

2 Medlicott v Emery [1933] All ER Rep 655.

3 Legal Profession Act 2007 (Qld) s 336(1) applying fair and reasonableness criteria under s 341. Normally assessment is done on instructions after reviewing the case with the client and attempting to remedy the position amicably with Counsel. Assessment is available for legal costs wholly or partly paid (s 336(3)), or paid without a bill (s 336(2)). Sophisticated clients may contract out of the right to costs assessment (s 344). 

4 Legal Profession Act 2007 (Qld) s 335(1) applying fair and reasonableness criteria under s 341. Assessment is available for legal costs wholly or partly paid (s 335(3)), or paid without a bill (s 335(4)). Sophisticated clients may contract out of the right to costs assessment (s 344). 

5 After: (a) the bill was given or the request for payment was made; or (b) the costs were paid if neither a bill was given nor a request was made: Legal Profession Act 2007 (Qld) s 336(4).

6 Legal Profession Act 2007 (Qld) s 335(5). In contrast to the 60 day time limit for assessing Counsel’s costs, the 12 month limit for reviewing the law practice’s costs may be extended under s 335(6) at the discretion of the costs assessor or court after considering the reasons for delay. 

7 Ipex ITG Pty Ltd v McGarvie [2011] VSC 675; Kong v Henty Jepson & Kelly Pty Ltd, unreported, Associate Justice Wood, 4 April 2011; I.J.R. Homes v MDM Legal Services SCI, unreported, Associate Justice Wood, 12 September 2011. See also Victoria Barrister, Stephen Warne’s <2011 Blogpost: Solicitors’ exposure to falling between two stools in solicitor-client taxations revealed>. 

8 Legal Profession Act 2007 (Qld) Part 3.4, Division 2.

9 Legal Profession Act 2007 (Qld) Part 3.4, Division 2; For guidance on the costs disclosure obligations of a law practice that engages counsel on behalf of their clients, including ongoing disclosure, see the QLS article, ‘Do I have to provide a costs disclosure when I engage a barrister or another law practice?’. 

10 Available when the client is ‘sophisticated’. Not available for normal clients or third party payers.

The authorities suggest that it is not necessary for a solicitor to have rendered a bill of costs prior to the transfer of funds from the firm’s trust account to a general account for professional costs. However, it is necessary that solicitors ensure that the authority given in the costs agreement is in fact wide enough to permit such a transfer.¹ In addition, section 58(3) of the Legal Profession Regulation 2017 (‘LPR’) entitles a law practice to withdraw the trust money, if the practice has given or sent to the client a request for payment, referring to the proposed withdrawal, and one of the following is also satisfied:

1. The money is withdrawn in accordance with a valid costs agreement that authorises the withdrawal (the costs agreement is required to be signed by the client);
2. The money is withdrawn in accordance with client instructions, written or confirmed in writing, that authorise withdrawal; or
3. The money owed to the practice is by way of reimbursement of money already paid by the law practice on behalf of the client.

The LPR also prescribes an alternate to the above, which permits a law practice to withdraw trust money if it has given the client a bill and:

1. The client has not objected to the withdrawal of the money within 7 days after being given the bill;
2. The client has objected within 7 days of being given the bill but has not applied for review of the legal costs (via assessment) within 60 days of  having been given the bill; or
3. The money otherwise becomes legally payable. 

In Re a Barrister and Solicitor (1979) 40 FLR 26 at 40 the full Federal Court noted as follows:

When a solicitor wishes to make a disbursement on behalf of a client, or to satisfy a claim for costs, for disbursements, or for costs and disbursements, out of money standing to the credit of the client in the solicitors trust account, he can do so, consistently with [statutory authority] only if he has the client’s authority to do so.  This will usually be express authority; it is possible, however for the authority to be implied.  It must in nearly all cases, be a simple matter to get the client’s express authority.

It is strongly recommended that solicitors comply with the requirement of section 58(3) of the LPR by having the appropriate notation on a bill of costs delivered or sent to the client. If relying on a costs agreement, that costs agreement would need to be valid in accordance with the provisions of the LPR and have been signed by the client.

1 Re Nelson (1991) 106 ACTR 1,10-11. 

When preparing a bill (tax invoice) we need to ensure that the bill is prepared in accordance with the terms of our cost agreement. The bill should reflect the work that can be recovered. The bill should identify the producer of the work, whether it is a partner, employed solicitor or a clerk. We should ensure that any descriptor properly identifies the person responsible for the work and is not misleading.

A bill must be signed on behalf of the law practice by a solicitor or an authorised employee. Alternatively it may be attached to a letter that is signed on behalf of the law practice by a solicitor or authorised employee. If the law practice is an incorporated legal practice, the bill must be signed by a legal practitioner director of the practice or a solicitor who is an officer or an employee of the practice.

There are a number of ways in which a bill can be served. Details can be found in s 330 of the Legal Profession Act 2007 (Qld) (‘LPA’). The most common service would be personally to the person or the person’s agent or alternately sending it by post to the usual business or residential address of the person or agent or to an alternate address nominated by the person or agent.

A bill may be provided electronically if the client consents (see s 330(7) LPA and the Electronic Transactions Act 2001 (Qld)). Cost agreements should provide for client consents as envisaged by this section.  

Unless the client is a sophisticated client, the bill must include or be accompanied by a written statement setting out the avenues available to a client in the event of a dispute in relation to legal costs (namely cost assessment under Division 7 of the LPA or having a cost agreement set aside under s 328 of the LPA and the applicable time limits).

For further information refer to the QLS Costs Guide 2014 Edition (clauses 2.2.3 - 2.2.4).

Summary

• A solicitor may take reasonable security as a condition of their retainer.¹ A charge over assets is not in itself unreasonable if negotiated fairly and its terms are not onerous to the client.
• Attempts to obtain or enforce security in an unreasonable manner may be regarded as a disciplinary matter.²
• A clause in the retainer permitting you to demand funds in advance, to take security over a client’s property, or granting a charge must be clear and must be specifically drawn to the client’s attention in a meaningful way. The client should be advised to obtain independent advice prior to the retainer or charge instruments being signed.
• An estimate of the amount(s) required and when this will be needed should be given.
• A prudent practitioner may in many instances insist that such advice be taken, rather than just recommend it.

Discussion

As a general proposition, there is no fundamental objection to a solicitor taking reasonable security as a precondition to entering into a retainer.

The Legal Profession Act 2007 (Qld) (‘LPA’) expressly permits:

320 Security for legal costs 

A law practice may-- 

(a) take reasonable security from a client for legal costs, including security for the payment of interest on unpaid legal costs; and 

(b) refuse to act, or stop acting, for a client who does not provide reasonable security. 

s 320 is declaratory of the common law.³ It is noted that:

• The most common security a solicitor obtains is the possessory lien over client documents and funds paid to trust in anticipation of work being performed.  
• There is no express definition of “reasonable security” either in the LPA or in the limited authorities dealing with the issue.⁴ Each case is fact sensitive.  
• It is important to remember that funds paid to trust for other reasons may not be used to pay a solicitor’s own fees, although the usual lien would apply to balance funds.
• There is authority for the proposition that a contractual security will displace a solicitor’s lien unless otherwise expressly agreed.⁵
• The term has had some attention in the context of the security that a solicitor may reasonably require⁶ when transferring a litigation file subject to a lien. The general approach taken is to analyse the rights the practitioner had under the contract of retainer and to ensure the substitute security leaves the law practice no better nor worse off.
• All contracts between a solicitor and client must be fair in process and reasonable in content.

Applying then, such first principles the enquiry will be in two parts:

• Was the process fair? Was it explained properly so that the (presumed) information imbalance between solicitor and client is overcome?
• Are the terms of the agreement a reasonable balance between interests of solicitor and client in the context of the particular retainer? Whilst freedom of contract is broadly respected, as an officer of the Court and a fiduciary such freedom is not absolute.

Is the process fair?

• You are a fiduciary contracting with a client, and the foundation of that contract must be “informed consent”. The solicitor bears the onus.⁷

• Onerous or unusual clauses must be brought to a client’s specific attention. The more unusual the clause, the greater the effort of disclosure that is required.
• A clause permitting a solicitor to require funds paid to trust in advance should be pointed out, together with some indication of the likely timescale that may apply.
• A clause granting a charge over client property in excess of the possessory lien, or permitting the solicitor to require such a charge should also be specifically approved by the client.
• A solicitor must always suggest that the client(s) seek independent advice about the clauses in the retainer concerning security and any related documents.⁸
• Whether the firm should go further and insist that the client obtain independent advice is a case-by-case decision, but the firm’s position will always be stronger if such advice is obtained.⁹ In many instances, a charge in favour of a solicitor will be of no effect unless independently explained to the client. Even if strictly valid, the reverse onus would mean that alleging failure to properly explain is a very effective way to prevent enforcement.        
• Risk factors such as client vulnerability, poor English skills or lack of business experience will all increase the risk to the solicitor in the absence of independent advice.¹⁰
• Third Party Payers are not clients, but will often be guarantors – either in form or fact – and the usual requirements for independent advice to them apply. The firm that is taking the charge cannot supply the relevant advice.¹¹
• As a matter of common sense, if your costs agreement permits you to demand funds “up front”, an agreed timetable for this at an early stage in the proceeding is important. Where such a clause is buried in the depths of a client agreement and only activated when a solicitor begins to panic about their potential exposure on a matter, it is quite likely that lack of advance notice would render the demand “unreasonable”.

Is the security reasonable?

• The security requested may be no more extensive than is reasonably required to protect the commercial interests of the practitioner, being the amount of fees and disbursements to be incurred from time to time.  
• Once a solicitor enters into a contract of retainer, the only security that can be claimed is either pursuant to that contract or in substitution for the solicitor’s enforcement of accrued rights.
• The security requested must be consistent with the retainer, and not attempt to impose significant additional obligations. Ideally, the security document suite should be annexed to the retainer agreement.
• Enforcement rights in the document and the way these are used must also be consistent with a solicitor’s ethical duty. The security cannot be used as a lever to circumvent a client’s right to seek assessment of a bill.  
• Where there is no further work to be done, excess security or funds held should be released.
• The security must only allow permitted interest¹² and enforcement costs.

Contingency fees

Security for contingent fees requires careful consideration. If not drafted appropriately a security (being either a possessory lien or otherwise) will not attach before a right to payment arises.¹³ The charge may be in place, but it secures nothing as there is nothing yet to be paid. The retainer and charge needs to be drafted together. They must cover the intended payment trigger - perhaps the conclusion of the matter - but also other circumstances that may bring the retainer to an end, such as the retainer being terminated by solicitor or client, the client’s death or insolvency etc.

Termination

Termination (by the firm in particular) needs to be considered carefully. Circumstances permitting termination should be set out in the contract of retainer. Remember such terms should also take into account the Australian Consumer Law protections. Courts are generally very reluctant to permit the solicitor their security where they have wrongfully terminated. In the case of the possessory lien, even lawful termination can be problematic. Consumer legislation may also preclude a contractual provision that allows the solicitor to terminate without cause.

Does your charge require PPSA registration?

If any security property is potentially the subject of the proceedings, a conflict of interest could arise given that:

• your consent to any settlement as mortgagee may be required; and
• you will have a direct, personal interest in the subject matter of the proceedings;  

In addition of course you could not claim to be “without notice” of any antecedent right claimed with respect to the security property. Ideally, if there is other security available that may be preferable.

Costs

The cost of entering into a client agreement is generally treated as an office overhead and not charged to a client. This is derived from the general principle that a client may only be charged for work done for a client’s benefit, not the practitioner’s. This also applies to the cost of taking a mortgage or charge over a client’s asset

Consumer protection legislation

You will also need to consider whether the charging document complies with consumer credit legislation, suchas the National Consumer Credit Protection Act or UCCC (as applicable to the extent that it creates an enforceable charge) and the Australian Consumer Law.

1 Legal Profession Act 2007 (Qld) s 320.

2 Legal Services Commissioner v Richardson [2009] LPT 17.

3 Prees v Coke (1871) 6 Ch App 645; Biggs v Hoddinott [1898] 2 Ch 307; see Dal Pont, Lawyers’ Professional Responsibility, 6^th Ed (2017) Thompson Reuters at chapter 15, page 516.

4 Oric Legal v Webb [2008] QDC 218 touched on the issue tangentially, however the security was unable to be registered so the issue was not considered in any detail.

Yes. In order to deliver bills to clients electronically, solicitors must comply with Part 3.4, Division 6 of the Legal Profession Act 2007 (Qld) (‘LPA’).

Section 330(7) of the LPA enables a client to consent to a bill being provided electronically as opposed to a client requesting that a bill be electronically delivered:

Despite anything in subsections (2) to (6), a bill may be given to a client electronically if the client consents to the bill being given electronically.

As an appropriate practice measure, practitioners should either obtain the client’s consent as an express term in their costs agreement or ensure that they obtain the written consent of the client to deliver bills in the matter electronically.

Yes. A reminder to solicitors entering into fixed fee costs agreements with their clients that the agreement needs to be both fair in the circumstances in which it was entered into and reasonable as to the amount charged.

Costs billed pursuant to a fixed fee agreement are subject to challenge pursuant to the Legal Profession Act 2007 (Qld). The fact that a fixed fee agreement has been entered into does not preclude disciplinary action being taken against a solicitor for charging excessive fees in circumstances where the fees are excessive. Further discussion of fixed costs agreements can be found in the QLS Costs Guide.

It is important not to confuse the concept of costs disclosure with the concept of a costs agreement.  Generally speaking, no costs disclosure is required where the legal costs are likely to be less than the regulated amount as it applies from time to time (currently $1500).^[1]

However, a costs agreement is strongly recommended. Under the Legal Profession Act 2007 (Qld) (‘LPA’) a solicitor can recover fees:

• based on a costs agreement; or
• pursuant to an applicable scale; or
• on assessment.^[2]

Delivering an invoice – no matter how reasonable – and seeing if the client argues about it is not on the list of options set out in the LPA. Issuing an invoice without a proper foundation in law may amount to a breach of your professional obligations.^[3]

Essentially, a solicitor in this position is in very much the same situation as a solicitor who was obliged to make costs disclosure but forgot, or even one that did not raise the question of costs at all and is seeking recovery on a quantum meruit or implied retainer.^[4] We can still be paid the reasonable value of the work, but there may be a lot of effort required to substantiate that the proposed charge is reasonable.^[5]

What is the difference between a costs agreement and a client agreement?

Although there are similarities^[6] between a costs agreement and a client agreement, the requirements for a valid costs agreement are set out in s 322 of the LPA. Essentially, it is a written offer followed by some form of acceptance. The acceptance may be by countersigning the offer and sending it back, or more commonly by conduct. The offer must specify which acts may be treated as acceptance of the offer.^[7]

The offer may be to conduct specific work (commonly fixed fee) or to operate prospectively for future instructions yet to be determined (commonly an hourly rate).

Upon reflection, many practitioners choose to deal with other essential contractual issues in the costs agreement as well. These vary from matter to matter, but may include;

• confirmation of the scope of the work;
• confirmation of the identity of the client;
• the right to bill progressively, or routinely, rather than at the conclusion of the instructions or discrete tasks;
• any exclusions or assumptions the work will be based upon; 
• termination rights for the law firm;
• Privacy Act notifications;
• document storage 
• appropriate consents – communicate electronically, document destruction, retention of records electronically, electronic billing,^[8] consent to take instructions from one party in a multiple party matter, trust account authority etc.

For too many solicitors the communication and management of costs is dominated by both the regulatory obligations outlined in Part 3.4 the Legal Profession Act 2007 ('LPA'), and the terminology used.

Disclosure

In order to avoid disputes and build client value recognition, it makes sense to involve the client in setting costs and gaining genuine agreement upfront rather than simply telling the client how much it is all going to cost. Unfortunately, the term ‘disclosure’ in the LPA causes many solicitors to assume all the responsibility for setting costs, reducing client control and raising the risk of client dissatisfaction.

With costs agreements, there is often no agreement because there is no understanding – it is often simply another poorly understood ‘take it or leave it’ offer. While clients might reluctantly agree to pay the figure mentioned in the costs agreement, they are rarely agreeing that this represents good value (that might or might not come later). Legal practices which value client relationships recognise that such costs agreements are inadequate; true agreement requires a much fuller understanding and acceptance of related costs and benefits.

Collaboration, partnering and control

A client’s concern about costs can stifle communication and lead to a lack of trust, and a client who feels they have lost control over costs can be resentful and argumentative about fees.

Solicitors can give clients greater control over costs by:

• discussing costs in as much detail as possible at the outset of the matter;
• asking the client what their budget is and what they can and cannot afford – explaining what can be done for them within their budget; 
• explaining cost variables and how different developments might affect costs;
• explaining the rates and experience of team members and asking if the client has preferences as to who does the work; and
• providing an example of what the bill might look like at the end of the matter – and asking the client if they would be happy with such a bill.

Collaborating on costs means that the solicitor also has to collaborate with the client on scoping the work. The aim here would be to only do work that the client values – which requires educating the client about the value of different tasks or activities that they don’t initially understand or appreciate. Scoping also means clarity as to what is to be done. The dangers of not having that conversation can result in the solicitor and/or the firm being exposed to potential civil claims. 

Scoping requires that we talk with the client about the extent of the risk that client is prepared to accept, having the client understand the extent of the risk involved in the work and the solicitor advising on this. Our conversation also requires that we test the client’s understanding of the work to be done, its commercial aims and the degree of risk. This conversation allows both the client and the solicitor to better understand the likely costs to the client for the work the client wants to engage the solicitor for.¹ 

Currently, too many solicitors fail to fully collaborate with clients on scoping and costs discussions with the result that either:

• unnecessary work is undertaken – leading to poor value recognition and costs resentment;
• all the work undertaken is necessary and of value to the client but the client doesn’t understand or recognise this – leading to similar costs resentment; and
• the solicitor fails to identify and undertake either necessary work (negligence risk) or fails to identify potential additional work that would be both profitable and highly valued by the client.

Collaboration and partnering on both costs and the scoping of work builds value recognition, boosts costs consciousness and ultimately leads to happier clients and higher profits.

1 For the perils of not having such a conversation see Robert Bax & Associates v Cavenham Pty Ltd [2013] 1 QdR 476.

It has come to our attention that some legal practitioners may be charging practice overheads and sundry expenses (telephone, printing and emails etc.) in a manner inconsistent with the LSC Regulatory Guide on legal costs, outlays and disbursements and billing.

Practice overheads and sundry expenses are not outlays and disbursements if the actual cost to the client has not been, or cannot be, identified. Such practice overheads and sundry expenses should not be charged separately as a percentage of your professional fees.

However, you may wish to incorporate that nominated percentage amount into your professional fees and specify that such fees are inclusive of practice overheads and sundry charges. It is our view that your professional fees ought to have been calculated by taking into account such practice overheads.

In contrast, it is possible for legal practitioners to add a surcharge (either as a percentage of the cost or as a fixed amount) to outlays and disbursements paid to a service company or related entity with full disclosure and the client’s fully informed consent.

At common law, there is no inherent entitlement allowing practitioners to charge interest on unpaid legal costs. However, section 321 of the Legal Profession Act 2007 (Qld) ('LPA') permits interest to be charged by a solicitor on unpaid legal costs if disclosure is made pursuant to section 308 of the LPA, there is an express provision in the costs agreement (subject to the general validity and enforceability of that agreement) and the bill for the costs contains a statement that interest is payable and the rate of interest. 

Section 72 of the Legal Profession Regulation 2017 (Qld) allows the prescribed rate to be determined by section 59(3) of the Civil Proceedings Act 2011.

Section 59(3) states:

The interest is payable at the rate prescribed under a practice direction made under the Supreme Court of Queensland Act 1991 unless the court otherwise orders.

The relevant practice direction (7 of 2013) can be found on the Supreme Court website and determines that a rate of 6% plus the relevant Cash Rate Target can be applied (NB: the relevant part of the practice direction is section 4, Money Order Debt). The current Cash Rate Target can be found on the Reserve Bank of Australia’s website. Pursuant to the practice direction, the rate prescribed is reviewed on 1 January and 1 July in each calendar year. The rate is then fixed for the relevant 6 month period.¹ 

1 Refer to paragraphs 1(b) and 4 of the practice direction.

Yes. In Farrar v Julian-Armitage & Anor^[1] the court noted that:

1. additional costs disclosure are required when a law practice engages another law practice (a barrister in this case) on behalf of a client; and
2. the solicitor’s costs disclosure obligation is an ongoing obligation.

The court also confirmed that section 315 of the Legal Profession Act 2007 (Qld) (‘LPA’), which provides that a law practice must disclose to a client any substantial change to anything included in a disclosure already made only applied to the solicitor as the barrister’s disclosure obligation was to the solicitor who retained the barrister not the client.^[2] The court reasoned that as conventionally the solicitor briefs the barrister to perform the ongoing work; the solicitor was therefore well placed to monitor the barrister’s likely billing and indeed should monitor the barristers likely billing in order to comply with the solicitor’s ongoing costs disclosure obligations.^[3]

Disclosure if another law practice is to be retained.

Section 309(1) of the LPA provides for what a law practice must disclose under ss 307B and 308 if the law practice intends to retain another law practice on behalf a client. Section 309(1A) also provides that a disclosure under subsection (1) is in addition to the disclosure required under ss 307B and 308.

Where a law practice makes a disclosure to the client under s 309(1)(a), it must disclose to the client the details mentioned in s 307B(2)(b), (c) and (d) in relation to the other law practice. Those details include:

• the basis on which the costs will be calculated including whether a scale of costs applies to any of the costs;
• an estimate of the total amount of legal costs; and
• an estimate of the total amount of disbursements.

 Where a law practice makes a disclosure to the client under s 309(1)(b), it must disclose to the client the details mentioned in section 308(4)(a), (c) and (d) in relation to the other law practice. Those details include:

• the basis on which the costs will be calculated including whether a scale of costs applies to any of the costs;
• an estimate of the total legal costs or a range of estimates of the total legal costs and an explanation of the major variables that will affect the calculation of those costs; and
• details of the intervals the client will be billed.

[1] [2015] QCA 289.

Managing costs is part of a solicitor’s role:

• First and foremost, take costs estimates seriously. This stage of the service may be – from the client’s perspective - as important as drafting pleadings. Junior staff should be briefed to prepare a framework for further assessment, not a client-ready document.
• Review old bills and keep them as a reference base. Work out what factors increased or decreased the cost of old projects and keep that actual data available to use in future. This information is valuable data for the firm. Keep it and use it accurately.
• Don’t have enough information at the outset? – make that clear. The initial costs agreement must provide a rough estimate, but make sure the client understands that the only accurate element of the initial estimate is likely to be the work necessary to do preliminary investigations.  
• The revision is just as important as the initial estimate – probably more so as it is based on much better data. Once the preliminary information is available, schedule a client meeting to confirm their objectives and proposed plan, then prepare the revised estimate in detail. This should be done as early as is feasible, and practitioners should not fall into the trap of doing a series of estimates for the ‘next step’. Clients need – and are entitled to – a genuine estimate of the entire cost as early as possible.
• Develop some understanding of the methodology appropriate to each stage. For example, the rough initial estimate is likely to be an ‘Analogous’ estimate based upon a historical understanding of what similar work cost in the past. More detailed estimates should be based upon a ‘Parametric’ or ‘Bottom up’ methods.
• Scope each stage of the work and break it down as much as possible. We are much better estimating the likely cost of a single element of a task than the whole thing. A good spreadsheet tailored to your usual areas of work is useful.
• Get it checked outside the team. Research shows we are not objective assessing our work either retrospectively or prospectively.
• Ensure that you understand your client’s objectives and expectations, and how these factors relate to the time, cost and quality of work that they expect to be performed. These considerations will shape the scoping of the work and define your engagement with the client.

If there is no legal liability to pay legal costs then this is likely to be contrary to the Australian Solicitors Conduct Rules 2012 (Qld) (‘ASCR’). Rule 4 details various ‘fundamental ethical duties’ including being honest in all dealings in the course of legal practice. Rule 34.1.1 states that a solicitor must not make any statement which grossly exceeds the legitimate assertion of the rights or entitlements of their client and which misleads or intimidates the other person. Rule 8 states that a solicitor must follow their client’s lawful and proper instructions.

Solicitors need to be especially careful how they word their letters following the case of Australian Competition and Consumer Commission v Sampson [2011] FCA 1165 (‘Sampson’). The issue in that case was misleading and deceptive conduct contrary to s 52 Trade Practices Act 1974 (Cth) (now s 18 of the Australian Consumer Law). You must make sure that you do not misrepresent or overstate the consequences of non-payment of an alleged debt. 

The courts have rarely had cause to consider whether conduct by a lawyer has amounted to misleading or deceptive conduct. However, in Sampson a solicitor was found to have made misleading or deceptive representations in four debt collection notices.

Before commencing proceedings to recover unpaid legal costs, review your file to ensure that you have made costs disclosure (if the professional costs are $1500 or more), provided ongoing disclosure, and issued a bill that conforms with the provisions of the Legal Profession Act 2007 (Qld) (‘LPA’). 

Proceedings to recover unpaid legal costs may be brought by a solicitor in the Queensland Civil and Administrative Tribunal (QCAT), or the Magistrates, District or Supreme Courts as appropriate for the amount involved. QCAT’s Minor Civil Disputes jurisdiction currently has jurisdiction for amounts up to $25,000. 

Default judgment is available for unpaid legal costs constituting a ‘debt or liquidated demand’. In practice, this means you will need to have complied with all the requirements for recovering the particular legal costs as set out in the LPA. 

You will need to plead in your application (to QCAT) or claim (in other courts) that all the requirements of the LPA have been fulfilled. If filing in QCAT, you will need to support this with evidence in your affidavit. Morales v Murray Lyons Solicitors (a firm) [2010] QCATA 87 provides a checklist of the materials required to be annexed to the solicitor’s affidavit. The following particulars should be set out in the affidavit:

• details of any applicable costs agreement, or the relevant scale of costs, or the basis for calculation of fair and reasonable costs (s 319 of the LPA);
• date and means by which a legal costs bill was served, confirming that at least 30 days have passed (s 329 of the LPA);
• details of the legal costs bill, which complies with s 330 of the LPA; and
• that a ‘Notification of client’s rights’ has been served (s 331 of the LPA).

If the claim is commenced in one of the courts then the particulars referred to above should be pleaded. 

A solicitor is entitled in pleadings to disclose client confidential information pertaining to the retainer. However, only to the extent reasonably necessary to establish the case. Disclosure going beyond this must be avoided as it will likely breach client confidentiality.¹ 

This FAQ is limited to guidance on what must be pleaded in the application to the court. For further guidance on: time limits, basis on which legal costs are recoverable, appropriate jurisdiction, procedural requirements, interest, the evidence which must be adduced by solicitor’s affidavit and implications of conduct such as failure to comply with disclosure obligations, see the QLS Costs Guide.

 1 See G E Dal Pont Lawyers’ Professional Responsibility (Thomson Reuters, 5th ed, 2013) 341.

Section 347 of the Legal Profession Act 2007 (LPA) provides a formula for calculating the maximum amount a law practice may charge and recover for conduct of a speculative personal injury claim, unless the law practice successfully applies to recover a greater amount of legal costs under subsections 347(2) and (3). 

Claim-related costs are the legal costs of the claim and any additional amounts for the claim, inclusive of GST. Additional amounts is defined in s 347(8) of the LPA and includes interest on credit facilities recommended or arranged by the law practice to fund disbursements and amounts paid or payable to another entity for obtaining instructions or preparing statements in relation to the claim (apart from barristers’ fees incurred after a notice of claim is given or in urgent proceedings).Practitioners should make themselves familiar with this definition.^[1]

According to the formula, claim-related costs, as worked out under the costs agreement with the client or under the LPA, must not be more than 50% of the client’s entitlement under a judgement or settlement (including entitlement to costs under the judgement or settlement) net of statutory refunds and disbursements. 

For example, if the client is entitled to $150,000 (inclusive of costs), refunds are $30,000 and disbursements are $10,000, the law practice cannot recover more than $55,000 including GST for legal costs and additional amounts, 

[$150,000 - ($30,000 + $10,000)] x 0.5 = $55,000.

The 50/50 rule is a cap on claim-related costs that can be charged and recovered, not a method of calculating costs such that the amount payable amounts to a 50% contingency fee. The other provisions of Part 3.4 of the LPA, including the prohibition on contingency fees, continue to apply. Legal costs are still calculated by reference to the costs agreement or as otherwise provided for in the LPA, up to the limit calculated using the 50/50 rule.

See also the Legal Services Commission guideline Costs disclosure and costs agreements and Proctor: Reminder for personal injuries practitioners – costs agreements. 

For more information see the following Proctor articles:

• Important changes for PI practitioners
• PI practitioners: Is it time to review your cost agreement?

^[1] Some additional amounts may have been considered disbursements prior to the 2022 amendments. Law practices should ensure that their costs agreements and understanding of the 50/50 rule remains current. 

Yes, but…see below.

If you are providing legal services and the fees are paid in advance then they should be viewed as trust monies.

If you are not providing legal services, then funds received are not trust monies^[1] and should not be deposited to a solicitor trust account as the intermixing of other money in a solicitor’s trust account is prohibited.^[2]

The decision of State of Queensland v Masman^[3] involved consideration of the character of a lump sum paid into the legal practice’s general account in advance of legal services provided by the legal practice. After careful consideration of the construction of the agreement the Court considered the terms of the retainer required the legal practice to charge the client for performance of legal work based on hourly rates set out in the agreement. The agreement was not for the payment of a lump sum regardless of the extent of services provided.^[4]

The position in Queensland is:

• If the services provided are legal services, then the funds provided in advance of providing the service are trust funds and should be deposited to the solicitor trust account and withdrawn in accordance with the Regulations.^[5]
• If the services provided are legal services and the legal practice does not operate a trust account, then the funds may only be paid to the law firm after the work has been done.

Are your legal practice’s metrics tied to billable hours? Adopting a subscription-based business model may require an adjustment to your legal practice’s metrics, particularly if your staff work to a daily/weekly/monthly billable hour’s budget.

Do clients contact you only once an emergency has arisen? For clients who are frightened of bill shock, a subscription model may encourage clients to reach out for assistance earlier and more often, before a problem has time to fester into a legal dilemma. This can also have positive health benefits for practitioners – instead of constantly operating in fight or flight crisis mode, advising clients proactively when a potential issue is identified may give you more time to consider solutions and put in place an appropriate strategy. Regular client contact also leads to developing stronger relationships with your clients.

Just like hourly rates, fixed fees, value pricing and other alternate fee arrangements, a subscription model is just another client service offering and may not be appropriate for all clients, or all legal practice areas. Meeting your client’s expectations and needs should be your paramount concern – however providing your clients with various fee options cements your legal practice’s client-centric character.

Are you struggling to increase revenue or maintain regular cashflow? A subscription model may allow you to simplify your revenue stream and increase profitability. As a minimum it might relieve “lumpy” cashflows.

Be aware of the risk issues involved with offering “unlimited” benefits or “unlimited access” to legal services. Carefully consider what services are included and excluded from the offer.

Ensure appropriate file notes are made of all conversations.

Consider how conflict checks might be performed during the subscription agreement if advice is sought in relation to a dispute or transaction with another party.

• How frequently may a client contact you?
• Is the contact offered in person consultations or limited to telephone/online consultations only?
• What is the length of time of a consultation under the subscription offer?
• Is there a minimum time duration for the subscriber’s membership plan?
• Is there a discount for memberships that have passed a milestone?
• Are certain benefits only available once a subscriber has been a member for a period?

• Legal Services

Have you considered whether your subscription service/membership program meets the criteria of “providing legal services”?

If you are not providing legal services, perhaps you are providing templates, or educational resources - any services provided may be outside the scope of your Lexon Insurance Pte Ltd professional indemnity insurance policy. Separate professional indemnity insurance may be warranted for non-legal services.

• Cost disclosure and agreement

If you are providing legal services, then you should ensure you make appropriate cost disclosure and enter into a cost agreement.

All cost agreements are required to be both fair and reasonable. The nature and extent of the service to be provided should be clear in scope. It would also be prudent to note services that are outside the scope of the agreement.

You should ensure that your legal practice does not charge excessive legal costs and the costs charged should be no more than reasonable costs.  “The circumstances that a solicitor’s right to exact certain charges is enshrined in an executed costs agreement will not necessarily protect the solicitor from a finding of gross overcharging”.^[1]