Legal Services Board
Costs disclosures
When retained by a client, legal practitioners and law practices must adhere to the requirements and procedures under the Legal Profession Act 2004 (Vic) (“the Act”) in relation to legal costs and client reporting.
When must a costs disclosure be made?
A law practice must disclose details regarding legal costs in writing before, or as soon as practicable after, the practice has been retained by a client.
The Victorian costs disclosure provisions in Part 3.4 of the Act apply:
- if a client first instructs a law practice about a matter in this jurisdiction;
- where the legal services are or will be provided wholly or primarily in this Victoria or the matter has a substantial connection in Victoria:
- by written agreement between the law practice and client; or
- by the client notifying the law practice in writing that they require a local costs disclosure (which must take place within 28 days after the law practice discloses to the client (under a corresponding law) information about their rights).
Exceptions to the costs disclosure requirement
No costs disclosure is required if the client is a “sophisticated client”, i.e. if the client is:
- a law practice or an Australian legal practitioner; or
- a public company or subsidiary of a public company;
- a large proprietary company, a foreign company (or subsidiary) or a registered Australian body (each within the meaning of the Corporations Act 2001 (Cth)); or
- a financial services licensee (within the meaning of that Act); or
- a liquidator, administrator or receiver (as respectively referred to in that Act); or
- a partnership that carries on the business of providing professional services, if the partnership consists of more than 20 members, or if the partnership would be a large proprietary company (within the meaning of that Act) if it were a company; or
- a proprietary company (within the meaning of that Act) formed for the purpose of carrying out a joint venture, if any shareholder of the company is a person to whom disclosure of costs is not required; or
- an unincorporated group of participants in a joint venture, if any member of the group is a person to whom disclosure of costs is not required and if any other members of the group who are not such persons have indicated that they waive their right to disclosure; or
- a Minister of the Crown in right of a jurisdiction or the Commonwealth acting in his or her capacity as such, or a government department or public authority of a jurisdiction or the Commonwealth.
Costs disclosure is also not required if:
- the total legal costs in the matter, excluding disbursements, are not likely to exceed $750; or
- the client has received one or more disclosures from the law practice in the last year and the client has agreed in writing to waive the right to disclosure on the basis that a principal of the practice decides on reasonable grounds that, having regard to the nature of previous disclosures and the relevant circumstances, further disclosure is not warranted; or
- the legal costs or the basis on which they will be calculated have been agreed as a result of the tender process; or
- the client will not be required to pay the legal costs or they will not otherwise be recovered by the law practice.
Billing
A law practice must not commence legal proceedings to recover legal costs from a person until at least 65 days after the law practice has rendered a bill to the client.
A bill:
- may be in the form of a lump sum or an itemised bill;
- with the exception of a sophisticated client, must include a written statement setting out the avenues open to the client with a dispute about legal costs:
- costs review;
- the setting aside of a costs agreement;
- making a complaint; and
- any time limits that apply to the taking of any of these actions.
The regulations prescribe a form that a law practice may supply to a client and, if the law practice does so, it will be taken to comply with this requirement. The regulations also provide that the form is to be developed by the Legal Services Commissioner who must make it available on the Internet. Visit the website of the Legal Services Commissioner to obtain the form.
A client may request an itemised bill within 30 days after receiving a lump sum bill. After receiving this request, a law practice must not commence any proceedings to recover those costs until at least 35 days after complying with the request.
Disclosure requirements
The disclosure must be in clear plain language, and may be in a language other than English if the client prefers.
The disclosure must include:
- the basis on which legal costs will be calculated, including whether a practitioner remuneration order or scale of costs applies;
- the client’s right to:
- negotiate a costs agreement with the law practice;
- receive a bill from the law practice;
- request an itemised bill within 30 days after receipt of a lump sum bill;
- be notified under section 3.4.16 of the Act of any substantial change to matters requiring disclosure;
- an estimate of the total legal costs or, if that is not reasonably practicable:
- a range of estimates; and
- an explanation of the major variables that will affect the calculation of costs;
- details of any billing intervals;
- any rate of interest on overdue legal costs;
- for litigious matters, an estimate of:
- the range of costs that may be recovered if the client is successful in the litigation; and
- the range of costs the client may be ordered to pay if unsuccessful;
- the client’s right to progress reports, to be provided on reasonable request;
- details of the person the client may contact to discuss legal costs;
- the avenues open to the client with disputed legal costs;
- any time limits that apply;
- that Victorian law applies to legal costs in this matter; and
- information about the client’s right:
- to sign a written agreement with the law practice under a corresponding law, and that those provisions of the corresponding law will apply to the matter; or
- to notify under a corresponding law (and within the time limit permitted by the corresponding law) within the time limits the law practice in writing that the client requires the corresponding provisions of the corresponding law to apply to the matter.
The regulations prescribe a form of the details above referred to as numbers 2(c), 7, 9, 10 and 12 above. A law practice that supplies this will be taken to comply with those requirements.
Disclosure and retaining another law practice
A law practice first retained by a client must disclose details relating to any other law practice it intends to retain on the client’s behalf. The disclosure must include:
- the basis on which legal costs will be calculated by the other practice;
- an estimate of the total legal costs or, if that is not reasonably practicable:
- a range of estimates of the total legal costs; and
- an explanation of the major variables that will affect the calculation of those costs;
- details of any billing intervals.
Effect of failure to disclose
If a law practice does not disclose to a client anything required by the Act:
- the client is not required to pay legal costs unless they have been reviewed by the Taxing Master of the Supreme Court (which may result in the costs being reduced by an amount considered proportionate to the seriousness of the failure to disclose); and
- it may not continue proceedings against the client for the recovery of legal costs unless the costs have been reviewed.
These provisions do not apply if the legal costs are the subject of a civil complaint to the Legal Services Commissioner.
A client may also apply to VCAT for the costs agreement to be set aside if the law practice has failed to disclose anything required on the basis that the agreement was not fair, just or reasonable.
Failure by a law practice to comply with cost disclosure requirements is capable of constituting unsatisfactory professional conduct or professional misconduct by any legal practitioner.