Discussing fees with your lawyer

Most people, lawyers included, are keen to build trust and credibility at the outset of a potential business relationship, but the important discussion of money is often left too late.  As uncomfortable as it may seem, it is important to have a frank discussion about costs with your lawyer so that you understand the legal fees involved in your matter to avoid problems later on.

It may seem obvious, but make sure you read and understand any documents relating to the retainer and fees before you agree to employ your lawyer.

Costs agreements

A costs or fee agreement with your lawyer will explain the scope of work required and exactly how much your lawyer is going to charge or the rate of charging that will be used.  This agreement is normally required before the work has begun* and must provide:

• an estimate of how much your matter is likely to cost, and
• the basis of calculating the costs (e.g. an hourly rate).

However, legal issues can be unpredictable (especially litigation) and the legal costs for some matters are easier to predict than others, so it is important to realise that this is an estimate of costs, and not a quotation.

If there is likely to be a significant increase in the estimated cost originally advised, your lawyer must provide an update, in writing, of any increase in charges.

The costs agreement must also provide information about your rights:

• to negotiate a costs agreement with the law practice;
• to negotiate the billing method;
• to receive a bill from the law practice and to request an itemised bill after receiving a bill that is not itemised; and
• to seek the assistance of the relevant Law Society in the event of a dispute about legal costs.

How are legal fees calculated?

Legal fees can be calculated in a number of ways, and may vary according to the type of service being provided.  Common methods include:

• fixed fee (e.g. for wills or conveyancing)
• item-by-item charges for specific tasks (e.g. witnessing documents)
• hourly or daily rate, including phone calls, meetings or court appearances.

Your lawyer may ask for a portion of a payment in advance to cover costs and disbursements.  This money must be placed in your lawyer’s “trust account” until the work is done and you are given a proper bill of costs.  However, the costs agreement between a solicitor and client may allow for payment of disbursements or for periodic payments on account of costs where agreed by the client.

Conditional costs agreements

A conditional costs agreement is when your lawyer takes the case on the basis that you will only pay their fees if you are successful.**

Whilst this sounds attractive, it is important to understand exactly what “successful” means in relation to your case.  For example, it could mean a settlement offer that your lawyer advises you to accept, which may still be lower than what you expect.  Also, if you win, the costs agreement may allow for an “uplift fee”, a premium of up to 25% above the normal fees, which you pay out of whatever money you get from the judgment.

Importantly, under a conditional costs agreement, even if you lose the case and may not have to pay your own lawyer, you may be required to pay the legal costs of the other side.  You may also have to pay disbursements, which your lawyer needs to pay on your behalf (e.g. doctor’s fees or “expert” fees).

*Exceptions to this requirement could be in situations where:

• legal services are required immediately, or soon after instructions are given, and it is not possible to disclose the costs in writing before the lawyer begins work, but costs must be disclosed later;
• legal fees are expected to be below a certain nominal amount ($1,500 in South Australia) and the lawyer has informed you of this, and
• the calculation or estimate of the total costs is dependent on factors which can’t be determined; in which case the lawyer must still give you a range of estimates on an ongoing basis and estimate the total cost as soon as possible.

**Conditional costs agreements do not apply to criminal proceedings or family law matters.