The issue of costs is central to all forms of legal practice. The law of costs represents an amalgam of several areas of substantive law; namely the law of contract, law of equity and it’s principles along with a fundamental reliance on statute and statutory courts.
Legislation for costs in Victoria:
- Supreme Court (General Civil Procedure) Rules 2005 (Order 62 And 63);
- Legal Profession Uniform Law Application Act
Legal Practitioner’s (professional costs) cost is the price for legal services and advice paid to a lawyer and are generally referred to as “lawyer and own client costs”.
- Legal professional costs are made up of the fees payable to a lawyer for professional services (professional fees) and professional disbursements
- Disbursements are generally defined as being payments the law practice makes on behalf of the client to others; for example Court filing fees and Counsel fees.
Legal costs are both a community and judicial concern due to the monopoly on legal services that lawyers hold and has led the courts to impose safeguards on lawyer-client charging (law of costs).
The law of costs ensures if the legal bill is deemed to be excessive by the client and settlement does not succeed with the client then litigation and a taxation hearing in the cost court provides the client protection from lawyers over charging.
The meaning of the word “taxation” in Latin is to assess or value something and a taxation hearing is an item by item assessment of a legal bill.
A taxation hearing or cost assessment is an opportunity for the lawyer and the client to have the legal bill assessed by a taxing registrar or Judge.
- An application for a costs review may be made regardless if the legal costs have been wholly or partly paid.
It is essential to determine before taxation if there is a valid cost agreement and adequate and ongoing cost disclosure.
- The results of this analysis will determine if the bill should be taxed on a court scale or according to the amounts referred to in the cost agreement.
If the client has entered into a costs agreement but believes it should be set aside because it is unreasonable they may apply to the Victoria Civil and Administrative Tribunal (VCAT) for an order that the costs agreement be set aside.
- VCAT may set aside a costs agreement if satisfied that the agreement is not fair or reasonable;
- If the costs agreement is set aside, VCAT may order the legal practitioner pay the client costs of the hearing;
- If the costs agreement is not set aside, VCAT may order the client to pay the legal practitioner’s costs of the hearing;
- There is no time limit for making a set aside application at VCAT.
For the lawyer the key to recovering outstanding client fees is to minimise write offs and the need for litigation.
- The best option for recovery is to liaise with clients about the issue to discuss payment options and the use of caveats.
- Litigation should be the last option after a client steadfastly refuses to pay their bill or there is a dispute over the amount of the bill.
Legal Practice List:
The most common civil disputes involved clients complaining about unexpectedly high legal costs or their dissatisfaction with the legal outcome their lawyer had achieved and enables the VCAT jurisdiction with the Legal Profession Uniform Law Application Act 2014 (Vic). The Legal Practice List handles:
- Applications from the Legal Services Commissioner about the professional conduct of lawyers;
- Claims by clients disputing legal costs;
- Claims by clients for losses they allege their lawyer has caused them to suffer;
- Claims by lawyers about non-payment of legal fees;
- Applications to overturn costs agreements between clients and lawyers;
- Claims by clients disputing legal costs under the Legal Profession Act and Fair Trading Act or the Australian Consumer Law and Fair Trading Act 2012;
- Claims under the Legal Profession Act and Fair Trading Actor the Australian Consumer Law and Fair Trading Act 2012 by clients for losses they allege that their lawyer has caused them to suffer;
- Claims by lawyers about non payment of legal fees under the Fair Trading Act or the Australian Consumer Law and Fair Trading Act 2012;
- Applications under the Legal Profession Uniform Law Application Act 2014 (Vic) to overturn costs agreements between clients and lawyers;
- Applications made by the Legal Services Commissioner under the Legal Profession Uniform Law Application Act 2014 (Vic) about the professional conduct of lawyers.
Costs Court Process (Taxation Hearing):
A taxation hearing (also called cost review) of the whole or any part of a legal bill is heard in the Cost Court of the Supreme Court of Victoria.
If a client received the bill on or after 9 May 2007 an application for costs review must be made within 12 months after one of the following:
- The bill was given or the request for payment was made; or
- The costs were paid if neither a bill was given nor a request was made.
Uniform Law outlines how one can bring proceedings having a bill of costs taxed:
- Order 63 a summons form 63A of Supreme Court Rules is completed;
- Attached to the summons is a bill in taxable form or the bill in dispute depending who is initiating the proceedings. Filing the bill of costs a day before the call over is satisfactory.
- A review of costs must be made by summons filed in the Prothonotary (of the Supreme Court);
- A taxation hearing is heard before a judicial registrar, justice or registrar.
- The summons must include a copy of the order or judgement under which the taxation is made and the bill of costs to be taxed.
- The summons must be served at least 14 days before the date of the hearing on the summons.
- If it is a solicitor seeking payment of it’s legal bill it is often more efficient to go straight to the Cost Court rather than another court for a debt collection because the bill would most likely be taxed anyway.
- A solicitor with a summons for taxation prepares and files a bill in taxable form to be assessed.
- If it is the client who files the summons then they must include a copy of the bill in dispute.
- After the summons is filed a call over will be ordered by the court where authenticated orders are prepared with a schedule and where any preliminary issues are dealt with.
- It is common for a dispute over the existence of a valid costs agreement is set down for a preliminary hearing.
- It is at the preliminary hearing where the existence of the cost agreement is determined and the form of the itemised bill will be drawn (on scale or according to the cost agreement):
- A preliminary hearing is predominantly heard on affidavit material;
- It is not uncommon for a new bill to be ordered if it is determined that the cost agreement is found to be invalid;
- If it is the solicitor who has issued the summons then after the preliminary hearing the client will file objections to the bill;
- A mediation is scheduled after any objections and affidavits are filed;
- Final hearing can be anywhere from a half day to multiple days depending on the number of items in the bill that are objected to.
In the Cost Court the taxing masters general rule is if a bill is reduced by more than 15% then the solicitor will pay the client’s cost of taxation if not then the client pays.
- In Victoria the costs to be taxed include the costs of the taxation unless the judgement otherwise provides.
A costs dispute which involves an amount of not more than $25,000 may be brought in VCAT or the cost court of the Supreme Court. Any amount above $25,000.00 must be brought in the cost court.
A client with a complaint against a legal practitioner where a person claims to have suffered financial loss (not exceeding $25,000.00) as the result of an act or omission of a lawyer and for any other genuine dispute can do so at the Legal Services Commissioner.
- Security of costs can apply to a taxation and is governed by order 62.02 of the Supreme Court (General Civil Procedure) Rules 2005 (Rules).
Getting The Right Cost Order
- Getting the right cost orders can mean a difference of thousands of dollars for a client.
- Even an unsuccessful party can be awarded the costs of particular issues on which it was successful.
- An order may also be made awarding costs of part of the proceedings to an unsuccessful party.
- Cost orders are given by judges and magistrates at different stages of a proceeding and deal with the liability of the legal costs at that stage.
Daniel Epstein of Counsel
