Disclosure (Communication to and Informed Choices by the Consumer Client)
Ensuring clients make informed choices – Best Practice for Communication with the client also increases likelihood that costs will be fair and reasonable
1. There are many of the costs provisions under both the LPA and the LPUL the contravention of which may amount to unsatisfactory professional conduct or professional misconduct. Avoidance of succumbing to conduct issues depends upon an understanding of and then compliance with the legislation.
2. Best Practice is Informing the (“Consumer”) Client: The LPUL appears to require even more transparency about the course of the litigation and the informed choices for the client in pursuing litigation – which of course translates into the exposure to costs and whether or not the fees are fair and reasonable and proportionate – and how much of the verdict remains after costs are deducted: Good Communication with the client upon these matters is essential at the time of –
(a) engagement – first instructions
(b) during the course of the engagement;
(c) when settling; and
(d) when billing.
Disclosure and the Engagement
3. The UL places a heavy onus on a law practice (including a barrister) to take all reasonable steps (s 174 (3))… to allow the client to make informed decisions about the future conduct of the matter”: s 174 (2)(b) –
4. In a nutshell the law practice must address-
Initial Disclosure – of Total Legal Costs
Under the Uniform Law a law practice must provide the client with information disclosing the basis on which legal costs will be calculated and an estimate of the total legal costs. The law practice must also provide the client with information about the client’s rights:
to negotiate a costs agreement with the law practice;
to negotiate the billing method;
to receive a bill and an itemised bill; and
to seek assistance of NSW Commissioner in the event of a dispute about legal costs
Ongoing Obligation to Disclose
If there is any significant change to anything previously disclosed to the client the law practice must provide the client with sufficient information about the impact of that change on the legal costs that will be payable to allow the client to make informed decisions about the further conduct of the matter: s 174(2).
Client’s consent and understanding
When providing the client with both initial and ongoing disclosure the law practice must take all reasonable steps to satisfy itself that the client has understood the information provided and given consent to the proposed course of action for the conduct of the matter and the proposed costs.
Legal Profession Uniform Law (NSW) s174(1)
Legal Profession Uniform Law (NSW) s174(3)
5. IMPORTANT- disclose TOTAL COSTS: a range of estimates (see s 309 LPA) is no longer good enough – s 174(1)(a). The work must be carefully thought through and a single figure provided: s 174(1)(a). The total fee for the whole engagement must be given. The total legal costs means what it says — the total fees for the whole engagement must be disclosed including GST and disbursements.
“All Reasonable Steps”: The law practice must satisfy itself that the client understands and consents to proposed course of action and fees disclosed
6. Good Communication is at the heart of taking Reasonable Steps.
How to start “doing it properly/compliantly”
7. A Costs Agreement is an agreement about the payment of legal costs. The Law Society of NSW has a raft of information on its website as to the introduction and operation of the Uniform Law including recommended forms for Standard and Conditional Costs Agreements and information for required Billing Notifications. Each update is numbered so that practitioners can adopt the most recent version.
The Conditional Costs Agreement with or without an Uplift and Best Practice
8. There are Mandatory Requirements for a Conditional Costs Agreement: s181 LPUL.
be in writing and in plain language; and
set out the circumstances that constitute the successful outcome of the matter to which it relates.
be signed by the client; and
include a statement that the client has been informed of the client’s rights to seek independent legal advice before entering into the agreement.
contain a cooling-off period of not less than 5 clear business days during which the client, by written notice, may terminate the agreement, but this requirement does not apply where the agreement is made between law practices only.
provide for disbursements to be paid irrespective of the outcome of the matter.
May not involve —
(a) criminal proceedings; or
(b) proceedings under the Family Law Act 1975 of the Commonwealth; or
(c) proceedings under legislation specified in the Uniform Rules for the purposes of this section.
9. Note that “commercial or government” clients are affected by s181 (1), (7) and (8).
Conditional Fee agreements may now contain an uplift in damages matters if a reasonable belief in success: s 182
10. But only where First Instructions were given on and after 1 July 2015 and all aspects of entering into a Conditional Costs Agreement are complied with.
Available for Subscribers
11. Alyson’s 2015 Article “Getting the Most Out of Costs Assessment in 2015 (now that the Uniform Law is operational)” considers things which might seem a “good idea” in and about a retainer for litigation work but which might “fall/fail” as not being within the spirit and intendment of the Uniform Legislation (or its predecessor the LPA and which still applies to pre- July 2015 matters).
12. Other issues you might need answers for –
- What if you do not have a costs agreement?
- What if your Costs Agreement is not fair and reasonable?
- Can you contract out of costs assessment?
- What if you fail to provide Continuing/ Ongoing Disclosure?
- What responsibilities arise before a settlement of litigation?
- What other costs requirements are there when conducting litigation? Consider avoidance of increasing legal costs: s 173.
- What are your billing responsibilities? Signing; compulsory notifications; interest;
- What is the effect of an itemised bill being called for?
- What are the consequences of charging unfair or unreasonable costs? Consider s 207.