November 29, 2013

Failure to provide proper estimates can result in serious costs consequences

Lawyers are required to disclose to (prospective) clients, in writing in a way that they can understand, the way in which the lawyer will charge and an indication of their likely costs exposure.  Failure to provide disclosure can result in serious consequences. 

Within the Legal Profession Act 2007 (Qld) (“LPA”), two sub-sections that often cause issues for law practices are failing to disclose, in a litigious matter, an estimate of recoverable and payable legal costs; and failing to give an estimate of total legal costs.

It is important to remember that a Disclosure Notice is a form of consumer protection. You must provide an estimate that is meaningful to the client so they can make an informed decision whether or not to continue with the matter.

According to section 316 of the LPA, the failure to disclose means that:

  • the client need not pay without assessment (s.316(1));
  • the law practice cannot sue the client without assessment (s.316(2));
  • a costs assessor is permitted to reduce the costs by an amount the assessor considers to be proportionate to the seriousness of the failure to disclose (s.316(4)).

Basically, considered and accurate estimates are the goal. These are achieved by giving consideration to the various factors in the case and tailoring the estimate on a matter by matter basis.  

Utilising a figure amount requires you to consider the matter at the time of initial instructions and forecast not only your costs but also the recovery. This is not a simple task however, if you are providing an estimate of your fees and are specifically tailoring each cost agreement to the particular matter, it should be little problem to provide a figure for the amount recoverable. 

The consequences for failing to comply with the disclosure requirements of the LPA are severe. Not only may costs be assessed according to scale but the costs assessor also has discretion to reduce the costs by an amount the assessor considers to be proportionate to the seriousness of the failure to disclose.

For more information, contact QICS, one of Australia’s leading legal costs consulting firms on 1800 267 846. 


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