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Published: 19 September 2018
Author: Creon Coolahan

Legal Costs Agreements – read the fine print

One of the most important documents a client will receive from their lawyer, but which the client will not often read carefully, is the Costs Agreement and Disclosure Statement. The Costs Agreement and Disclosure Statement governs how professional fees will be calculated for the work done, and when (and if) the disbursements incurred by the lawyer will be payable by the client at the conclusion of the matter.

Think of the bill you receive from your lawyers as like that of a mechanic – professional fees represent the charge for the lawyers’ labour, and disbursements are the “parts” bought in by the lawyers to get the job done for you.

Nearly every Victorian law firm practising in the area of personal injuries litigation now offers a “No Win, No Fee” agreement. This means that the lawyers are generally prepared to waive their professional fees/charges for their labour if you do not have a successful outcome from your claim. Such an agreement is considered to be a “Conditional Costs Agreement” for the purposes of the Legal Profession Uniform Law (Victoria) (“the Uniform Law”). Section 181 of the Uniform Law states that a Conditional Costs Agreement “may provide that the payment of some or all of the legal costs is conditional on the successful outcome of the matter to which those costs relate”.

Two traps often arise for the inexperienced

Firstly, many personal injury law firms offering a “No Win, No Fee” agreement don’t actually agree to waive the disbursements/parts bought in to run your case. In a complex personal injury case these disbursements can run into many thousands, and sometimes tens of thousands, of dollars.

At Ryan Carlisle Thomas we offer a “No Win, No Fee or Expenses” Conditional Costs Agreement. This means our clients can rest assured that when we think we can win your case we are prepared to put our money where our mouth is and pay for the disbursements/parts up front without looking to recoup those expenses from our clients if there is no successful outcome from the case. The last thing a client would want is a heft billy for medical reports fees, doctors’ witness expenses and Court filing fees at the end of the litigation process.

Secondly, the actual method used to calculate the amount of professional fees needs to be examined closely. It is common for personal injury litigation firms to adopt a Scale of Costs that has been approved by the relevant Court to form the basis for those calculations. The County and Supreme Courts now effectively use the same Court Scale (ie. the Supreme Court Scale as set out in Appendix A to Chapter I of the Supreme Court (General Civil Procedure) Rules 2015), although the amount of the County Court Scale is 80% of the items set out in the Supreme Court Scale.

Using a Scale of Costs provides some certainty to clients as to how the professional fees/labour will be calculated in their matter, and some security in the knowledge that the Scale is published and formulated by the relevant Court itself.

Almost all personal injury law firms charge an “uplift fee” of 25% in relation to the method of calculation of the professional fees. An uplift fee of 25% on our professional fees/labour charges (but not the disbursements/parts) is charged by this firm because we are responsible for carrying the burden of all legal costs (including both fees and disbursements) and we take a risk in pursuing tough cases that may not succeed even though we have the belief at the start of the case that it is likely to have a successful outcome. We bear that risk without seeking a payment of professional fees/labour charges or disbursements/parts along the way if we believe that your case has the prospect of a successful outcome.

It pays to compare agreements

We have recently viewed a Conditional Costs Agreement where the law firm concerned has proposed to charge clients professional fees/labour using the Supreme Court Scale, plus an uplift fee of 25%, plus further uplifts in accordance with the Scale of 30% and 5%.
While the lawyers are legally able to charge for their labour on this basis, a 25% uplift fee can be justified for acting on a “No Win, No Fee basis” in most cases, a prospective client would do well to shop around and try and negotiate a better deal and alternative method of calculating the labour. The right to do so is enshrined in the Uniform Law.

If you are embarking on a WorkCover, TAC or public liability case and have received a Conditional Costs Agreement and want independent legal advice, please contact our friendly and expert personal injury litigation solicitors in your local area.

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