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Fact Sheet 2
Costs Disclosure
According to the Legal Profession Act 2004, legal practitioners must disclose their costs to their clients when handling matters under New South Wales law. This means that they must disclose:
- The basis on which the costs will be calculated;
- The client's right to negotiate a costs agreement with the practitioner;
- The client's right to receive a bill from the practitioner;
- The client's right to request an itemised bill within 30 days after receiving a lump sum bill;
- The client's right to be notified of any substantial change to the matters disclosed;
- An estimate of the total legal costs or a range of estimates with an explanation of the major variables that may affect the calculation of the costs;
- Details of how frequently the client will be billed;
- The rate of interest the client will be charged on overdue costs;
- The client's right to receive a progress report (which the client may be charged for);
- Details of the person the client may contact to discuss their costs;
- Details of what the client may do in the event of a dispute including their right to have costs assessed, their right to set aside a costs agreement and their right to mediate their costs dispute, along with any time limits in relation to the above.
The client should also enquire about other expenses that are likely to arise in the legal proceedings. These expenses are called disbursements. Examples of disbursements include fees for medical and other experts, reports, fees for filing documents in court, witnesses, expenses and barristers, fees. The client pays for disbursements either directly or as part of the practitioner's bill.
It is often difficult to predict the final cost of legal services because most cases involve some unknown factors. However, the client should ask the practitioner to estimate how long the matter is likely to take and what kinds of expenses will be involved.
Additional Disclosure with Litigious Matters
If the matter involves litigation, the practitioner is also required to provide to the client:
- An estimate of the range of costs that may be recovered from the other side if the client is successful;
- An estimate of the range of costs that the client may be ordered to pay to the other side if the client is unsuccessful.
If settlement of a litigious matter is negotiated, the practitioner must also disclose to the client, before settlement is executed:
- An estimate of the costs payable by the client;
- An estimate of any contribution towards those costs likely to be received from the other side.
In family law matters, if an offer of settlement is made during a property case, there is also a duty to inform a client about actual costs to date and estimated costs to complete the case.
When and How Disclosure is Required
Practitioners should disclose their costs as outlined above before commencing any work for the client. In matters where that is not possible, such as an urgent criminal matter or an urgent letter as a first step in a longer process, the practitioner should disclose their costs as soon as practicable after doing that work.
Costs disclosure must be in writing and in plain English. There is no requirement that the disclosure be signed by the client.
Exceptions to the Requirement for Costs Disclosure
A practitioner is not required to disclose costs in circumstances where:
- Costs are not likely to exceed $750, excluding disbursements and GST;
- The client has received one or more disclosures in the previous 12 months and has agreed in writing to waive the right to disclosure.
Change to the Estimate of Costs
It is not unusual for unforeseen costs to arise as the matter progresses. The practitioner must notify the client in writing of any substantial change to the original estimate provided.
Failure to Disclose
If a practitioner has not disclosed his costs to the client the client may:
- Not pay costs until the costs have been assessed by the Costs Assessments Scheme [see OLSC Fact Sheet on Costs Disputes];
- Apply for any costs agreement entered into with the practitioner to be set aside;
- Raise non-disclosure as a defence to any proceedings for the recovery of costs.
July 2008
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