The paper envisages that the following principles would be embodied in national legislation and more detailed guidelines under the supervision of the National Legal Services Board -
Objectives of the scheme
The scheme would provide for law practices to make disclosures to clients regarding legal costs; regulate making of costs agreements regarding legal services, including conditional costs agreements (eg 'no win, no fee' agreements); regulate billing of costs for legal services; provide a mechanism for assessment of legal costs and for setting aside of certain costs agreements.
Costs disclosure
Before, or as soon as practicable after, giving instructions to act clients will receive sufficient written information about the estimated costs of their matter, and the method for calculating that estimate, to reasonably allow them to make informed decisions about the conduct of the matter. That will include disclosure in relation to costs where a law practice intends to retain another law practice or expert on behalf of the client.
Any significant change to a matter previously disclosed must be notified to the client as soon as reasonably possible after the law practice becomes aware of the change. Costs disclosure should be presented in a concise, clear and accessible format.
Legal practitioners should take reasonable steps to ensure that clients understand the information disclosed. Consumers from "culturally and linguistically diverse backgrounds" should not be disadvantaged.
Clients must be informed about their right to negotiate a costs agreement and to challenge legal costs.
Costs agreements are enforceable as a contract between the parties. (Any assessment will by reference to the costs agreement if it is a valid agreement complying with the legislation). If a law practice fails to disclose anything required by the legislation, the client will not be required to pay legal costs until they have been assessed. The law practice must not commence or maintain proceedings to recover fees until after the assessment. Sophisticated clients may contract out of the mandatory costs disclosure and assessment regimes.
Reasonableness
Legal practitioners and law practices may only charge fair and reasonable costs. A costs agreement is prima facie evidence of what are fair and reasonable costs. Legal costs should be proportionate to the complexity or importance of the issues and amount in dispute. Law practices and their clients may agree to a variety of methods for calculating legal costs. Courts/tribunals may set aside costs agreements that are not fair or reasonable. Legal practitioners and law practices must make reasonable endeavours to act promptly and to minimise delay and must not work in a way that unnecessarily increases costs in a matter.
Billing
A law practice may not seek to recover its fees unless it has provided a properly prepared bill to the client. A law practice may not charge for the preparation of bills and clients may request an itemised bill (at no additional cost). Bills must include a notice about a client’s right to challenge legal costs or to have a costs agreement set aside.Liability of principals for overcharging. Principals of law practices are responsible for the reasonableness of bills rendered to clients, and will be personally liable in the event of the charging of excessive legal costs in matters in which they have acted or which they have supervised. A law practice may be liable for the charging of excessive legal costs by one of its principals or one of its employees.
Cost assessment
Costs assessments must be conducted in accordance with National Rules. Determinations of costs assessors are admissible in disciplinary proceedings as evidence as to the reasonableness of legal costs.
Regulatory Guidelines
The Board will issue National Rules detailing actions that practitioners are required to take to comply with and give effect to the legislative principles. A breach of the National Rules will be conduct capable of constituting unsatisfactory professional conduct or professional misconduct. In the case of law practices, a breach without reasonable excuse may constitute an offence.
