16th May 2011

It is well documented that in 2008 there were allegations of overcharging by some lawyers in the area of personal injury law.  The standing committee of the attorneys general (scag) met on 17.4.09.  Its agenda included discussion on overcharging and exploitation of users of legal services.  Leading up to the SCAG meeting, the NSW Attorney General noted that “the overwhelming majority of the legal professional act with integrity.   However, there have been allegations of a number of lawyers grossly overcharging clients, particularly those with limited English-language skills.”  He announced that the nsw government had developed a package of options that seek to ensure greater transparency and accountability in the area of legal fees, including:

*strengthening the existing provision that a written disclosure to a client may be in a language other than English if the client is more familiar with that language;
*requiring law practices to provide periodic itemised bills to clients in personal injury matters;
*prohibiting law practices from seeking clients’ authorities to deduct legal costs from a settlement amount without having first informed the client of the settlement amount and issued the client with a bill;
*providing that a bill or covering letter must be signed by a principal of a law practice; and prohibiting law practices from charging excessive costs in a legal matter; and
*providing a financial penalty for breach of this provision without a reasonable excuse.

The NSW Attorney General announced that those options would be presented at the scag meeting for consideration and referral to a national working party.

At the SCAG meeting a range of proposals to constrain overcharging were considered and it was agreed that they would be further developed for possible adoption in the national model law.   The Law Society of NSW has announced that it welcomes and supports a regime of accountable and ethically based costing for the provision of legal services that is in line with community expectation, but is yet to see details of any proposal/s.

Any changes will no doubt occur after rigorous consultation, debate and implementation.  Until then, there are provisions in the Legal Profession Act (the Act) including provisions on disclosure of legal costs, method of calculation and particularisation of work, notification of rights relating to legal disclosure and costs, options available (and steps to take) in the event of a costs dispute and therefore offer some protection to consumers of legal services.

The Act currently requires law practices to disclose the following matters to clients:

  • the basis on which they will charge;
  • the client’s right to negotiate a costs agreement, receive a bill from the law practice, request an itemised bill from the law practice after receiving a lump sum bill and the right to be notified of any changes to these matters;
  • an estimate of the total costs if reasonably practicable or otherwise a range of estimates of the total costs;
  • the range of costs to be recovered from the other side if successful in litigation or that will be ordered to be paid if unsuccessful;
  • progress reports and client’s options in the event of a costs dispute.

Disclosure must be made in writing before, or as soon as practicable after, the law practice is retained.  Any failure by a legal practitioner to disclose such matters in writing should be questioned by a client.

In personal injury cases, costs that are ordered by the courts to be paid to successful claimants are capped in the event of a verdict that does not exceed $100,000.  In many cases, the costs actually incurred in securing a verdict are greater than the capped amount.  The cap does not extinguish the law practice’s entitlement to payment of the excess (which is, in practice, borne by the claimant out of the settlement monies).  Such an entitlement must, however, be disclosed to the client by the law practice.

The above are general observations of law practices’ and clients’ respective obligations and entitlements.  Reference should be made to the legislation for further details, or legal advice obtained.

Worker or independent contractor?  The answer is crucial as the first opens the door to potential entitlements under the workers compensation legislation and the second may not.

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