Information on Legal Costing
(i) Assessment of costs - NSW
The assessment regime was introduced in New South Wales in 1994 replacing the old "taxation" of costs which had been administered by the Supreme Court by a handful of Registrars. The system is now operated by dozens of court appointed Barristers and Solicitors (now generally called Lawyers) who now deal with both solicitor/client and party/party costs for all state jurisdiction matters.
Though it de-regulated much of the costs and was ostensibly intended to narrow the "gap" between solicitor/client and party/party costs by introducing a universal "Costs Agreement", it did to a certain extent not do so as these costs are still assessed with different criteria.
Where non or insufficient disclosure has been made, or there is no Costs Agreement (or is void due to non disclosure), or no estimate has been given and there should be, etc, no costs are recoverable unless assessment is made at cost to the Solicitor irrespective of the result, subject to the $750 exemption rule.
Since the new costs assessment regime was introduced in 1994, we have encouraged our client Solicitors to pursue their costs via the assessment process and not as a debt to be proven in open court. Though this can take upwards of 3 months or more, it is a straight-forward paper-driven process and is highly recommended.
The resulting issue of a "Costs Certificate" (on payment of the assessment costs) can be used for recovery as a registered judgment (by lodging with a Form 45) and can avoid to a certain extent the risks of allegations of negligence, overcharging and disclosure issues that can be made against the Solicitor in open court (and then referred to the Law Society), which, should be avoided.
The costs of the assessment can be subject to a separate Costs Certificate. It is within the discretion of the Costs Assessor to make that decision and if he/she chooses, apply the 15% rule.
The Legal Profession Act (2004) and Regulations (2005) have effectively been overtaken by the Legal Profession Uniform Law (2014) and its Regulations (2015) and General Rules (2015) which effectively apply on the basis of instructions/commencement of proceedings after the 1 July 2015.
A. Solicitor instigates assessment
(recovery of "uniform costs")
The pursuit of solicitor/client costs (also called "practitioner/client") requires the Solicitor to apply for assessment within 12 months of the giving of the tax invoice or when demand for payment has been made. Preparation of a Form A2.1 together with 3+1 copies of one's itemised Bill of Costs and all disbursements. It is the filed with the "Manager, Costs Assessment" of the Supreme Court of NSW together with the requisite 1% filing fee (or $100 minimum). The amount is based on the disputed costs in solicitor/client and the entire costs in party/party matters.
A Costs Assessor will be appointed by the Court who will then invite a response from the client, normally to file its Notice of Objections within 21 days. Considerations of procedure, disclosure, Costs Agreements, the items of costs, and applying the fair and reasonable costs criteria, are all matters the Costs Assessor will be considering.
B. Client instigates assessment
(defending "uniform costs")
A client has the right to apply for assessment within 12 months or receipt of a tax invoice or when costs have been paid or partly so. The client has a further right in circumstances where disclosure or costs agreement issues are questionable, to apply for assessment within 12 months from the delivery of the final bill or payment or part payment is made. Form A1.1 is utilised.
A Costs Assessor will be appointed by the Court who will then invite a response from the solicitor, normally to file its Bill of Costs, within 21 days. Considerations of procedure, disclosure, Costs Agreements, the items of costs, and applying the fair and reasonable costs criteria, are all matters the Costs Assessor will be considering.
C. Party/party applications
(seeking "ordered costs")
Claiming party/party costs (also called "inter partes") is similar with subtle differences and the use of Form A3. There are no time limit issues here, though 21 days must be given after service of the Bill of Costs to allow for any Objections to be forthcoming, beforehand, then filing it.
(ii) Reviews
Reviews are conducted before 2 Cost Assessors and thus the costs of this form of assessment becomes more expensive (though the paper work remains essentially the same). The application must be made within 30 days from the date shown on the Costs Certificate which will be the date it is forwarded. Though it sounds like an appeal, it is in fact conducted as a fresh review. There is also the 15% rule which is applied in respect to the result so that if the proponent does not improve its position by 15% it will lose the costs of the review.
(iii) Bill of Costs
(costs statement)
A Bill of Costs is essentially a chronology or narrative of the legal work performed. Properly drawn it includes such detail on each of the items as to allow the Costs Assessor to determine the reasonableness or otherwise of those items of work without any reference to the file itself. This is why the Bill must be fully detailed with each item including:
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the date;
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a description of the task;
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the time taken;
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the length of the document (often ignored by many draftsmen);
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the person who performed that task;
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the charge.
Thus merely itemising the Bill as "letter to AB, telephone call to CD", etc, which is quite common in billable formats, will not suffice.
Disbursements (also called "outlays" in Queensland) are a list of all the third party expenses including fees for Barrister, medico-legal, agent, filing, etc. Copies of the invoices should be attached. Some internal expenses often called "sundries" incl postage, fax, photocopying, etc can be claimed as well, but these should be forewarned in the Costs Agreement.
On your instructions, we will draft for you a properly constructed Bill of Costs with its:
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introductory form;
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narrative summary of the work;
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all individual items of work (specifying the above 6 descriptions);
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list of disbursements; and
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summary page,
all ready for filing.
Our drafting will be sourced from your file including file notes, pleadings, documents, letters, accounts, etc. We will then if applicable cross-check the draft with your time sheets. Sometimes this can conflict with the raw draft and we will take instructions from you on the final draft as the Bill of Costs is your document. Further, often during the drafting or completion of the Bill, we will identify areas where detail is lacking. You will be advised on such areas and invited to provide additional particulars to help bolster your Bill of Costs.
Conflict with clients
There is an imposition that the parties should show signs of discussing and negotiating their dispute before going onto assessment, otherwise the Costs Assessor may make an adverse costs order.
A client has the right in circumstances where a Solicitor has properly served a lump sum bill (tax invoice) to request an itemised Bill within 30 days after becoming payable. The Solicitor must comply within 21 days. Where disclosure or Costs Agreement issues are evident this right to an itemised Bill of Costs can be extended.
If a Solicitor is subject to such queries about its costs, say a request for an itemised Bill after the lump sum Bill has already been served, he/she should give notice to the client that if the subsequent Bill of Costs is greater than the tax invoice, a claim will be made for the greater amount. That should be made as part of the initial tax invoice disclosure. This is entirely proper and should be a standard term in all outgoing tax invoices.
(iv) Objections
In response to a Bill of Costs assessment, the opposing party is entitled to make its objections in a document called a Notice of Objections. The party is normally allowed 21 days to do so (ridiculously short in a large matter).
But the Uniform Act does state that the Costs Assessor must give a reasonable opportunity for the parties to respond. Any extension should be sought directly from the Costs Assessor.
The document has no prescribed form, but each item challenged should be addressed individually and provide in detail what the Objections are based on. This is where your Legal Costs Consultant with a background in law as a Solicitor and with years of legal costing experience is a substantial advantage.
Once drawn, we then submit it to you for final approval and you then file it with the Costs Assessor directly.
In fact it is our favoured work. A challenge to the mundane. And of course it is given priority.
It is also possible to draft and submit an Objection in general terms only (similar to the above initial summary which precedes the individual items) rather than one fully itemised, such as targeting excessive hourly rates, document size, minimal unit charging, excessive Barrister fees, etc. But these carry less weight and are used only in circumstances where a party has limited funds for the contest.
(v) Replies
In response to the Objections, the proponent of the bill of costs is entitled to respond. Again these is no prescribed form but in practice these tend to address the items in the Objections, item-by-item.
Usually the impetus of the Replies is in the general narrative, rebutting the thrust of the Objections, and addressing each item. Here too it is possible to submit the Replies only in general terms, but again it carries less weight.
Ideally in an assessment contest, you want the Costs Assessor to read your individual Replies as the very last thing he/she reads when considering each and every item in the collection of documents before him/her, ie Bill of Costs, Objections, Replies, irrespective of the fact that the Replies can in fact appear to be rather repetitive.
(vi) Appraisals
An Appraisal of costs is where a Legal Costs Consultant is required to make a calculated estimate of the costs in a file without having to draft the individual items such as in a Bill of Costs. Normally a report and the basis of the calculations are contained therein.
This can be useful as a negotiation tool. In certain circumstances where there is agreement between the parties, the Legal Costs Consultant can determine the costs like a form of arbitrator.
This is not that common. We do these by request only.
(vii) Solicitor/Client vs Party/Party vs Indemnity costs
The following is a very brief outline of the differing costs and are not entirely without exceptions:
"Solicitor/client costs" are those costs owing to a Solicitor by its client and is assessed on the basis of the Costs Agreement and the rate of charging specified therein. They must still be fair and reasonable.
"Party/party costs" are those owing by the paying party to the other (often the losing party to the winning party) and is assessed on the basis of they being fair and reasonable (as well as proportionately and reasonably incurred). Whilst the Costs Agreement may be sighted by the Costs Assessor (such as to satisfy the "partial indemnity rule") he/she shall not apply its terms in making that determination of fair and reasonable costs. These were once described as "no frills" costing.
Normally this represents a partial payment (or partial indemnity) of one's costs. It is often referred to as costs awarded on an "ordinary basis".
"Indemnity costs" are a specific court order which effectively allows the successful party in court proceedings to obtain its costs (solicitor/client) based essentially upon its Costs Agreement. A full indemnity so to speak.
(viii) Assessment of costs - QLD
CURRENTLY, WE DO NOT SERVE THE QUEENSLAND PRACTITIONER
Remember the disclosure provisions, those provided pre-costs agreement (Form 1) and those provided with the tax invoice (Form 2).
Solicitor instigates assessment
(recovery of "uniform costs")
Costs recovery in solicitor/client matters is governed by the Legal Profession Act 2007 (Qld). The professional costs, subject to a Dislosure Statement and a Costs Agreement (unless exempted by the $1,500 rule) will be determined in a state jurisdiction determined by the quantum thereof. That is, by the Magistrates Court (if up to $150,000), the District Court (if up to $750,000) and the Supreme Court (above $750,000).
Parties are encouraged o discuss, mediate, or formally apply for costs assessment within 12 months of the Bill being given/requested/paid.
Federal matter are determined by the Federal Courts themselves.
Party/party applications
(seeking "ordered costs")
To commence to recover party/party legal costs under a court order one must first serve the paying party with a Form 60A Costs Statement (an itemised Bill of Costs). The response is a Notice of Objections in accordance with Form 61 within 21 days, its content similar to that in practice in NSW.
There follows the filing of the formal application by Form 9 in the state jurisdiction from where the order originates. The parties then agree on the selection of a Costs Assessor from a list or register.
If an order has already been made in the state jurisdiction (very likely), there are no filing fees, but, the Costs Assessor will do so for his/her work. A determination is made on the assessment and who pays the costs of the assessment. A Certificate is issued.
If a party disagrees with the Certificate, a request for Reasons to be provided can be made and the Costs Assessor should comply within 21 days. A Review follows.