Liability limited by a scheme approved under Professional Standards Legislation.

Barristers’ Fees:

Law and Practice 2016

M L Brabazon SC

Presented 13 February 2016, NSW Bar Association, Ballina

Liability limited by a scheme approved under Professional Standards Legislation.

Contents

1. Introduction, Concepts and Overview ............................................................................... 1 1.1. CONCEPTS: RETAINER, DISCLOSURE, AGREEMENT .................................................................. 2 1.2. CONCEPTS: LAW PRACTICE, CLIENT AND THIRD PARTY PAYER ................................................. 4 1.3. OVERVIEW ............................................................................................................................... 5

2. Disclosure .......................................................................................................................... 6 2.1. GENERAL INITIAL DISCLOSURE OBLIGATIONS: SS 174, 175 ...................................................... 6 2.2. CONTINUING DISCLOSURE ........................................................................................................ 9 2.3. ADDITIONAL DISCLOSURE BEFORE SETTLEMENT: S 177 ........................................................... 9 2.4. EXEMPTION CONCERNING COMMERCIAL OR GOVERNMENT ENTITIES: S 170 .......................... 10 2.5. FAILURE TO DISCLOSE: S 178 ................................................................................................. 10 2.6. UPLIFT FEES ........................................................................................................................... 11 2.7. PROGRESS REPORTS ............................................................................................................... 11 2.8. ASSOCIATED THIRD PARTY PAYERS: S 176 ............................................................................. 11 2.9. OTHER DISCLOSURE REQUIREMENTS...................................................................................... 12

3. Costs Agreements ............................................................................................................ 12 3.1. WHY BOTHER WITH A COSTS AGREEMENT? ............................................................................ 12 3.2. COSTS AGREEMENTS GENERALLY: S 180 ............................................................................... 13 3.3. CONDITIONAL COSTS AGREEMENTS: S 181 ............................................................................. 14 3.4. CONDITIONAL COSTS AGREEMENTS WITH UPLIFT FEES: S 182 ................................................ 16 3.5. PROHIBITION OF CONTINGENCY FEE AGREEMENTS: S 183 ...................................................... 17 3.6. FORM ..................................................................................................................................... 17 3.7. CONTRAVENTION OF DIVISION 4: S 185 ................................................................................. 17 3.8. COSTS AGREEMENTS AND COMMERCIAL OR GOVERNMENT ENTITIES: S 170 .......................... 18

4. Other Matters ................................................................................................................... 19 4.1. BILLING ................................................................................................................................. 19 4.2. PAYMENTS IN ADVANCE ........................................................................................................ 21 4.3. RECOVERY ............................................................................................................................. 21

Appendix 1: Precedents for Barristers’ Costs Agreements and Disclosures ........................... 22

1. Barrister/Solicitor Precedents .......................................................................................... 22 1.1 LETTER FROM BARRISTER TO SOLICITORS (UL S 175(2)) ............................................................. 22 1.2A BASIC COSTS AGREEMENT BETWEEN BARRISTER AND SOLICITORS .......................................... 23 1.2B CONDITIONAL COSTS AGREEMENT BETWEEN BARRISTER AND SOLICITORS .............................. 24 1.3 PERSONAL INJURY CASES NOTE ................................................................................................... 26 1.3.1 PERSONAL INJURY: SOLICITOR’S WARRANTY ............................................................................ 27 1.3.2 PERSONAL INJURY CLIENT’S CERTIFICATION AND SOLICITOR/CLIENT AGREEMENT ABOUT

BARRISTER’S FEES .............................................................................................................................. 28

2. Barrister/Client Precedents .............................................................................................. 29 2.1 COVERING LETTER FROM BARRISTER TO DIRECT ACCESS CLIENT................................................. 29 5. 2.2 DIRECT ACCESS COSTS AGREEMENT BETWEEN BARRISTER AND CLIENT ............................ 30

Basis of Charging .................................................................................................................... 35

Motor Accidents Compensation Act Cases ............................................................................. 35

Appendix 2: Billing Checklist for Barristers ........................................................................... 37 TRANSITION TO UNIFORM LAW .......................................................................................................... 37 PRELIMINARY MATTERS: TIME RECORDING ....................................................................................... 37 FORM, CONTENT AND SERVICE OF THE BILL ...................................................................................... 37 GST TAX INVOICES AND ADJUSTMENT NOTES .................................................................................. 39 PAYMENT IN ADVANCE ....................................................................................................................... 39 BILLING BOILERPLATE ....................................................................................................................... 40

1

BARRISTERS’ FEES: LAW AND PRACTICE 2016

The first purpose of this paper is to provide an introduction for barristers to the general

provisions of the Legal Profession Uniform Law (NSW) (UL) relating to legal costs, costs

disclosure and costs agreements. It focuses primarily on the typical case where counsel is

retained by a solicitor. The second purpose is to provide practical resources in the form of

precedents for disclosure and agreements documents, a billing guide, and some observations on

the law and practice relating to fee recovery.

Part 1 introduces some basic concepts and distinctions and gives an overview of the topic. Part

2 addresses disclosure under UL Part 4.3, Division 3. Part 3 deals with costs agreements under

Division 4. Part 4 considers billing, recovery and other issues. Appendix 1 reproduces

precedent costs disclosure and agreement precedents with annotations as published on the NSW

Bar Association website. Appendix 2 reproduces the barristers’ billing checklist from the same

source.

1. INTRODUCTION, CONCEPTS AND OVERVIEW The Uniform Law replaced the Legal Profession Act 2004 (NSW) (LPA 2004) from 1 July

2015,1 which had in turn replaced the Legal Profession Act 1987 (NSW) (LPA 1987) from 1

October 2005.

The general rules regulating legal costs are now found in several places:

UL Part 4.3,

the Legal Profession Uniform General Rules 2015 (UGR) Part 4.3,

the Legal Profession Uniform Law Application Act 2014 (NSW) (AA) Parts 6 and 7, and

the Legal Profession Uniform Law Application Regulation 2015 (NSW) (AR) Parts 5 and 6.

Previously, these rules were found in LPA 2004 Part 3.2 and the Legal Profession Regulation

2005 (NSW) (LPR 2005) Part 9.2

There are other, more specialised rules for particular areas of practice, such as motor accidents

and workers’ compensation cases. They are not dealt with in this paper.

The regulation of legal costs may be seen as comprising rules by reference to which costs are

quantified and a procedural mechanism by which that quantification is carried out. Both were

heavily reformed in New South Wales by the Legal Profession Reform Act 1993. That Act was

a manifestation of Parliament’s faith in a free and informed market. Legal fees were

deregulated, subject to consumer protection in the form of disclosure obligations. Most court

scales were abolished. The old necessary and proper test for party/party fees was abandoned,

and a single test of what is fair and reasonable was adopted across the board.3 These were part

1 The main transitional rule is in UL Sch 4 cl 18. The most important question is usually whether the

instructing solicitor was retained before or after the new regime commenced.

2 Before 1 October 2005, they were found in LPA 1987 Part 11 and corresponding regulations.

3 There is still some difference between party/party and practitioner/client costs because the frame of

reference for deciding what is fair and reasonable is necessarily different. In theory, however, a

successful litigant who conducts a case in a reasonable manner as if he or she would have to pay for it

out of his or her own resources in the end should recover full practitioner/client costs under a

party/party costs order. See Hon Justice Paul Brereton, Report of the Chief Justice’s Review of the

2

of the rules by reference to which costs were quantified. The Act also established a one-stop

shop for the assessment of legal costs, whether between party and party or between practitioner

and client (including analogues, such as between barrister and solicitor). The system was

administrative not judicial, informal to the point of being almost formless, outsourced to private

providers whose status was undefined – they might be described as extra-judicial but quasi-

judicial decision makers or independent statutory referees – and it was funded on a user-pays

basis through filing fees and, in some cases, the awarding of costs of assessment.

Some of these reforms, particularly the idea of deregulation and the ‘fair and reasonable’ test,

though not the wholesale abolition of court scales, found favour in other States. The New South

Wales experiment in privatised outsourcing of assessment has not been copied elsewhere.

The Uniform Law is a product of the Council of Australian Governments, although to date only

Victoria (the host jurisdiction) and New South Wales have taken it up. Its main function is to

establish an integrated national legal profession. As such, it must deal with the regulation of

practitioner/client costs. The various jurisdictions agreed on criteria for quantification in terms

which reflect contractual freedom (deregulation) and consumer protection by disclosure of

information. They did not agree on a mechanism for quantification of costs, which is left to

local legislation. That circumstance explains the present and unavoidable proliferation of

legislative instruments. The New South Wales assessment mechanism is now principally

contained in and under AA. The recent Chief Justice’s Review of the Costs Assessment Scheme

recommended numerous reforms to the assessment scheme, some of which have been

implemented. Further changes may be expected over the next few years.

1.1. Concepts: Retainer, Disclosure, Agreement

The subjects of costs disclosure, the regulation of charging and some aspects of fee recovery

fees are regulated by UL Pt 4.3. In order to achieve legal and ethical compliance as well as

sound professional practice, it is necessary to maintain a clear distinction between several

different but related concepts:

the retainer of a law practice by a client or by another law practice on behalf of a client;

the various disclosures that a law practice is obliged to make to a client, a retaining law practice, and/or a third party payer under UL Pt 4.3 Div 3;

a costs agreement between a law practice and a client, a retaining law practice, or a third party payer under UL Pt 4.3 Div 4;4 and

the rights and obligations of a law practice relating to billing, assessment and recovery of professional fees and other legal costs as against a client, a retaining law practice

and/or a third party payer.

Costs Assessment Scheme (Supreme Court of New South Wales, 12 March 2013)

[1.1.4]: ‘The evident goal of

adopting common ‘fair and reasonable’ criteria for party/party as well as for practitioner costs was that

a successful litigant who conducts litigation in the manner of a hypothetical reasonably prudent person

and who has the expectation of meeting their own costs from their own resources and has adequate but

not extravagant means should be fully compensated for costs by an ordinary party/party costs order’,

citing the Attorney-General’s second reading speech (Hon J.P. Hannaford MLC, NSW Legislative

Council Parliamentary Debates, Hansard, 16 September 1993, at 3278).

4 The expression ‘costs agreement’ is no longer defined. See heading 3.2 below. Contrast LPA 2004

s 302 which provided that, in Pt 3.2 of that Act, ‘costs agreement means an agreement about the

payment of legal costs’.

http://www.lawlink.nsw.gov.au/practice_notes/nswsc_pc.nsf/pages/607

3

A retainer is not a costs agreement. A costs agreement is not a disclosure. A disclosure is not

a costs agreement.

The legislation recognises a fundamental distinction between a retainer by a ‘client’ of a ‘law

practice’, and the case where a law practice retains ‘another law practice … on behalf of a

client’.5 It is convenient to refer to these cases respectively as direct and indirect retainer.

A directly retained law practice has more onerous disclosure obligations than an indirectly

retained law practice. The indirectly retained law practice does not have to make initial

disclosure to the client, but must give the retaining law practice the ‘information necessary’ to

enable it to fulfil a fraction of its disclosure obligations referable to the costs of the indirectly

retained law practice.6 The policy reason for this is obvious. The primary consumer protection

provisions of the Act look to the relationship between the client and the directly retained law

practice – typically, the solicitors’ firm with principal conduct of litigious or non litigious

business on the client’s behalf. Both formally and in substance, the typical barrister stands at

second remove from the client, being briefed and retained by the solicitor. The same is true of

a solicitor acting as agent for another solicitor who has principal conduct of particular legal

business for a client.

It is obvious, without the statute having to say so, that no barrister or solicitor can act

professionally for a client without a retainer. When a solicitor retains a barrister on behalf of a

client of the solicitor, the solicitor authorises the barrister to act for the client and establishes a

professional relationship between them: the solicitor’s client becomes the barrister’s client as

well. The legislation requires disclosure and permits costs agreements; it does not require a

costs agreement. There are several permitted combinations of retainer and costs agreement

involving a barrister:7

An indirect retainer and an indirect costs agreement, both of which are between barrister and instructing solicitor as principal parties. This most closely corresponds to

the traditional arrangement before the 1993 reforms. The main difference is the present

contractual and legal force of the solicitor’s obligation to pay the barrister, which was

previously binding only in honour and a matter of professional discipline.

A direct retainer and a direct costs agreement, both between barrister and client.

An indirect retainer between barrister and solicitor, and a direct costs agreement between barrister and client.

A direct or indirect retainer and a costs agreement with a person other than client or instructing solicitor (an ‘associated third party payer’), whether or not there is also a

costs agreement with one of those persons.

It should also be obvious that a costs agreement is not a disclosure, and vice versa. A costs

agreement is a contract: a set of rules mutually agreed between two or more parties as the basis

for regulating a relationship between them as a matter of private law. The ordinary rules of

offer and acceptance apply. A disclosure is a unilateral communication from one person to

another by which the first person informs the second of matters of fact and/or opinion. A lawyer

who sends a document headed ‘costs agreement’ to a client or instructing solicitor with a view

to the latter accepting its terms makes a contractual offer. There is no costs agreement unless

the offer is accepted or, as occasionally happens, further negotiation leads to agreement on some

other terms. The sending of a ‘costs agreement’ document may satisfy one of the sender’s

disclosure obligations relating to the proposed basis of charging for legal services, but the

5 UL s 175 (and previously LPA 2004 s 310). The distinction is recognised with various consequences

in other provisions.

6 See UL s 175. There are other differences, but this is the greatest.

7 UL s 180(1).

4

disclosure obligation does not require a costs agreement, nor does it justify conflation of the

two concepts.

1.2. Concepts: law practice, client and third party payer

UL definitions are generally adopted for purposes of AA.8

1.2.1. Law practice

The legislation uses the concept of a law practice as a generic term for an entity that carries on

domestic legal practice on its own account. ‘Law practice’ is defined to include a ‘sole

practitioner’ and a ‘law firm’.9 A ‘sole practitioner’ is ‘an Australian legal practitioner who

engages in legal practice on his or her own account’, and an ‘Australian legal practitioner’ is an

‘Australian lawyer who holds a current Australian practising certificate’. An ‘Australian

lawyer’ is ‘a person admitted to the Australian legal profession in this jurisdiction or any other

jurisdiction’. A ‘law firm’ is a partnership consisting only of … Australian legal practitioners

[or] one or more Australian legal practitioners and one or more Australian-registered foreign

lawyers’.10

It is clear enough that a barrister in private practice is a law practice, as is also a solicitor in

private practice as a sole practitioner, or a firm of solicitors in private practice. The same cannot

be said of a solicitor or group of legal practitioners employed as such by a large corporation or

by a government department or public authority; the question in any particular case must be

answered by applying the statutory criteria to the facts and circumstances of the particular case.

The mere possession of an unrestricted practising certificate does not make a person a law

practice.

1.2.2. Client

For the purposes of UL and dependent legislation, the definition of ‘client’ is attractively

parsimonious: ‘client includes a person to whom or for whom legal services are provided’.11

This takes the ordinary meaning as its starting point, but seeks to remove some perceived

uncertainty by adding an inclusive definition which, while close to the ordinary meaning, is

simpler and more succinct.12

1.2.3. Third party payer

The legislation takes the view that a non-client who incurs an obligation to pay a client’s legal

costs should have some protection, other than whatever general equitable or contractual

obligations the client might have to protect the non-client’s position and confers on a ‘third

party payer’ a defined subset of the rights accorded to a client. A third party payer is a non-

client who is obliged to pay legal costs or who, being obliged, has paid such costs.13 The

8 AA s 3(2).

9 A law practice is defined in UL s 6(1) as ‘(a) a sole practitioner; or (b) a law firm; or (c) a

community legal service; or (d) an incorporated legal practice; or (e) an unincorporated legal

practice’. Each of these terms is separately defined.

10 These nested definitions are also in UL s 6(1).

11 UL s 6(1).

12 For considerations of the ordinary meaning of ‘client’ in relation to a lawyer, see Apple v Wily [2002]

NSWSC 855 at [11] (Barrett J), Maxwell v Chittick (unreported, NSWCA, 23/8/1994, Pegrum v

Fartharly (1996) 14 WAR 92, Simmons v Story [2001] VSCA 187.

13 UL s 171 defines ‘third party payer’ and related concepts; cf LPA 2004 s 302A. The third party

payer provisions may be traced to amendments enacted by the Legal Profession Further Amendment

Act 2006 (NSW).

5

obligation may be owed to the law practice or to someone else – most commonly but not

necessarily the client. If the third party payer’s obligation is owed to the law practice (with or

without some other obligee) the person in question is an associated third party payer and has,

as one might expect, stronger rights than a non-associated third party payer.

A law practice that retains another law practice on behalf of a client is not on that account a

third party payer.14 This avoids a solicitor being classified as a third party payer in relation to

a conventionally retained barrister.

A liability insurer will typically be a third party payer in relation to solicitors retained for the

insured client’s defence. If, as is usual, the insurer promises to pay the solicitors’ fees, it will

be an associated third party payer in relation to the solicitor. It will also become an associated

third party payer in relation to a barrister retained by the solicitors if it incurs an obligation to

the barrister for the barrister’s fees. If, without incurring an obligation to the barrister, the

insurer incurs an obligation to the solicitors to pay the barrister’s fees, the insurer will be a non-

associated third party payer in relation to the barrister and an associated third party payer in

relation to the solicitors in respect of the barrister’s fees.

A beneficiary in a trust or estate who is dissatisfied with legal costs claimed by or paid to a law

practice for services provided to the trustees, executors or deceased15 may be expected to face

considerable difficulty in qualifying as a third party payer.

1.3. Overview

Anticipating what will follow and leaving aside the rights of third party payers, a few major

propositions for barristers can be stated in summary form:

Leaving aside ‘commercial or government’ entities, a law practice is expressly forbidden

to charge costs in excess of what is fair and reasonable in all the circumstances.16 A

compliant costs agreement is prima facie evidence that its terms are fair and reasonable,

provided that the law practice has relevantly complied with its Div 3 disclosure

obligations.17 This creates a rebuttable presumption, regardless whether the issue is

contested before a costs assessor or in a court. UL differs from LPA 2004, which made

costs agreements enforceable but provided for them to be set aside if not fair and

reasonable.

Leaving aside arrangements involving a commercial or government entity as client or

associated third party payer in relation to the barrister, and assuming that the barrister is

retained in the usual way by a solicitor law practice on behalf of the client:

o the barrister’s initial and continuing Div 3 disclosure obligations are limited, and disclosure must be made to the solicitor;

o the barrister’s pre-settlement disclosure obligations are not limited, although compliant disclosure by the solicitor satisfies the barrister’s obligation.

If the client is a commercial or government client, a barrister has no Div 3 disclosure

obligations, regardless whether the barrister is retained by in-house lawyers or by a law

14 UL s 171(3).

15 Beneficiaries in a deceased estate are clearly not third party payers in relation to legal costs paid by

the deceased. See Allwood v Benjafield [2014] NSWCA 355 [46]. Strictly speaking, the point was

conceded, not determined, but its correctness cannot be doubted. The beneficiaries’ success in the

Court of Appeal, which managed to achieve a just result, was due to an extraordinary series of events

and errors that is unlikely to be repeated.

16 UL s 172(1).

17 UL s 172(4).

6

practice.18 If there is a costs agreement between them, it is enforceable without reference

to the statutory ‘fair and reasonable’ test in s 172 and without risk or right of costs

assessment. The foregoing propositions apply mutatis mutandis in respect of a commercial

or government associated third party payer that has contracted with the barrister.

The alternative of accepting a retainer directly from a non-‘commercial or government’

client prima facie exposes the barrister to the full range of disclosure and regulatory

obligations that apply between solicitor and client. Few barristers are likely to be

comfortable with such an outcome as a general setting for the conduct of professional

practice, since barristers’ practices are typically organized on the basis of dealing

financially and contractually with other professionals. This permits counsel to maintain a

relatively lean operation in chambers, and is an important structural advantage of the

divided profession. Barristers in a divided profession need not duplicate the input cost of

a solicitors’ practice. Because their overheads relate almost exclusively to the provision of

their professional services rather than client-related credit management and consumer

relations, their services can be offered at prices which are highly competitive relative to the

level of their professional expertise. This efficiency delivers considerable public benefit,

particularly when it is seen in conjunction with the more obvious public benefit that any

client has access to the whole bar, regardless of the client’s choice of solicitor.

2. DISCLOSURE This section focuses on the disclosure obligations under UL Part 4.3 of a barrister who is

indirectly retained by a solicitor on behalf of a client. I do not propose to deal with any

additional disclosure that may be required by other statutes.

2.1. General initial disclosure obligations: ss 174, 175

In order to understand a barrister’s disclosure obligations, it is convenient to start with the

solicitor’s initial and continuing disclosure obligations. UL ss 174 and 17519 relevantly

provide:

174 Disclosure obligations of law practice regarding clients

(1) Main disclosure requirement

A law practice—

(a) must, when or as soon as practicable after instructions are initially given in a matter, provide

the client with information disclosing the basis on which legal costs will be calculated in the

matter and an estimate of the total legal costs; and

(b) must, when or as soon as practicable after there is any significant change to anything

previously disclosed under this subsection, provide the client with information disclosing the

change, including information about any significant change to the legal costs that will be

payable by the client—

together with the information referred to in subsection (2).

(2) Additional information to be provided

Information provided under—

18 A cut-down set of rules applies to conditional costs agreements with commercial or government

clients. In the unlikely event of an uplift agreement with such a client, there are still disclosure

obligations under UL s 182 in Div 4.

19 Compare LPA 2004 ss 309 and 310. The UL provisions are a considerable improvement,

particularly in relation to a directly retained law practice.

7

(a) subsection (1)(a) must include information about the client’s rights—

(i) to negotiate a costs agreement with the law practice; and

(ii) to negotiate the billing method (for example, by reference to timing or task); and

(iii) to receive a bill from the law practice and to request an itemised bill after receiving

a bill that is not itemised or is only partially itemised; and

(iv) to seek the assistance of the designated local regulatory authority in the event of a dispute

about legal costs; or

(b) subsection (1)(b) must include a sufficient and reasonable amount of information about the

impact of the change on the legal costs that will be payable to allow the client to make informed

decisions about the future conduct of the matter.

(3) Client’s consent and understanding

If a disclosure is made under subsection (1), the law practice must take all reasonable steps to

satisfy itself that the client has understood and given consent to the proposed course of action

for the conduct of the matter and the proposed costs.

…

(6) Disclosure to be written

A disclosure under this section must be made in writing, but the requirement for writing does

not affect the law practice’s obligations under subsection (3).

175 Disclosure obligations if another law practice is to be retained

(1) If a law practice (the first law practice) intends to retain another law practice (the second

law practice) on behalf of a client, the first law practice must disclose to the client the details

specified in section 174(1) in relation to the second law practice, in addition to any information

required to be disclosed to the client under section 174.

(2) If a law practice (the first law practice) retains or intends to retain another law practice (the

second law practice) on behalf of a client, the second law practice is not required to make a

disclosure to the client under section 174, but must disclose to the first law practice the

information necessary for the first law practice to comply with subsection (1).

(3) This section does not apply if the first law practice ceases to act for the client in the matter

when the second law practice is retained.

Other provisions of s 174 deal with thresholds below which modified disclosure rules apply.

These do not affect a solicitor’s obligations with respect to barrister’s fees. They can modify

the obligations of a directly retained barrister, but not those of one who is indirectly retained,

even if he or she has a costs agreement with the client.

The solicitor’s disclosure obligations may be distilled to eight items of content and one item of

form:

Basis of charging – s 174(1)(a) – asap (‘as soon as practicable’) after instructions

Estimate of total legal costs – s 174(1)(a) – includes barristers’ fees and other

disbursements; GST inclusive – asap after instructions

Client’s rights – s 174(2)(a) – asap after instructions

Significant changes to any of the above – ss 174(1)(b), 174(2)(b) – asap after change

Obligation to take ‘all reasonable steps’ re understanding and consent – s 174(3)

Basis of charging in relation to barrister – s 175(1) – time limit implied as none express

Estimate of total legal costs in relation to barrister – s 175(1) – time limit implied

Significant changes in relation to barrister – s 175(1), 174(1)(b) – time limit implied

8

Form: in writing – s 174(6) (no express equivalent in s 175)

If a non-client owes a legal obligation to the law practice to pay legal costs for legal services

provided by the law practice to the client – i.e. if there is an associated third party payer in

relation to the law practice – the law practice is required to make similar disclosure to that

person to the extent that it is relevant and material to that obligation (s 176).

Exemptions apply if the client is a ‘commercial or government client’ or if the associated third

party payer has similar commercial or government characteristics (heading 2.2 below).

Leaving aside the complications of commercial or government entities and associated third

party payers, the disclosure obligations of a conventionally retained barrister under UL s 175

may be distilled to the following:

‘Information necessary’ re basis of charging – s 175(2) – timing implied

‘Information necessary’ re estimate of total legal costs – s 175(2) – timing implied

Significant changes re either of above – s 175(2) – timing implied

There is no statutory requirement of writing here, but a prudent barrister will document all

disclosures in a form that can be readily retrieved and proven. As a matter of practice

management, all the documents (electronic and/or paper) relating to disclosure, costs

agreements and estimation of the legal cost budget should be recorded and kept together.

Dedicated legal billing software facilitates this.

What is the content of an indirectly retained barrister’s disclosure obligation?

A solicitor needs to rely on a barrister directly for knowledge of the barrister’s basis of charging.

In most cases, the barrister will give that information to the solicitor case by case. If a new

matter arises out of an old one (e.g. an appeal), it is prudent to treat it as if it were a fresh brief

in order to ensure that the new matter is clearly within the scope of a costs agreement and to

exclude any argument that the barrister has failed to give requisite disclosure.

It is not necessarily the case that a solicitor needs an explicit estimate from a barrister in order

to make an estimate of the barrister’s fees. The amount of a barrister’s fees depends to a large

degree on how the work of the case is distributed between counsel and solicitor and the degree

to which the solicitor chooses to rely on counsel –matters that vary widely from solicitor to

solicitor and even from case to case. When the barrister is retained, the solicitor will usually

know more about the case than the barrister. A competent solicitor may be able to come up

with a sensible estimate of counsel’s fees based on the solicitor’s own knowledge of the case,

professional experience, and case management preferences. Such an estimate must also be

subject to heavy qualifications, no matter who gives it. The better view is that ‘necessary’ in

s 175 refers to whatever extra the solicitor needs to be able to perform his or her obligation. In

other words, the barrister’s job is to top up the solicitor’s knowledge to the extent that it appears

deficient. On this view, a barrister who discloses his or her rates and invites the solicitor to

discuss the budget for legal costs and to identify any information that the solicitor considers

necessary will have a substantial measure of protection from any claim of deficient disclosure

if the solicitor does not take up the barrister’s invitation. (See Appendix 1: Precedents for

Barristers’ Costs Agreements and Disclosures, precedent 1.1.)

The test of necessity in s 175 must presumably be judged by reference to the content of the brief

(if it has been delivered) and other relevant communications with the solicitor at or before the

time for disclosure. At the least, the barrister should ensure that the solicitor is aware of the

barrister’s proposed terms and charges, or of the barrister’s standards terms and charges for the

relevant class of work, including billing. More is required if the solicitor has explicitly

requested assistance with respect to an estimate of counsel’s fees.

9

Counsel should consciously consider what is ‘necessary’ for each new brief. As a matter of

best practice rather than positive obligation, one should also consider what would be of best

utility for the solicitor and client, and for the barrister’s relationship with them. The statutory

rule is a legal minimum. It does not prevent counsel from discussing likely costs beyond what

is ‘necessary’, nor does it prevent the barrister from indicating estimates and updating them.

The cost of litigation is usually close to a client’s heart, and most solicitors appreciate a frank

discussion about the budget. That discussion is best approached as an opportunity to build a

good working relationship with the solicitor.

The time requirement for initial disclosure by an indirectly retained law practice is implicit.

The instructing solicitor should give corresponding disclosure as soon as practicable.20 It

follows that the indirectly retained barrister should make disclosure before or very shortly after

the retainer.

The obligation under s 175(2) arises separately and afresh for each new matter. Usually, but

not automatically, it requires fresh action by the barrister. If the solicitor already knows the

barrister’s basis of charging and billing and requires no additional information in order to make

the required estimate of counsel’s fees and to work out whether any fixed costs provisions

apply, no further conduct is required of the barrister to achieve compliance. A minority of

barristers may find it convenient to rely on a standing arrangement with solicitors who regularly

send them work. If they do so, it is important to include an explicit term in the arrangement

requiring the solicitor to tell the barrister in writing if any further information is required to

enable the solicitor to comply with section 175(1) for a particular matter. Any such standing

arrangement should be in writing, and any changes (such as rate increases and the like) should

be provided for and properly documented as they occur. For most barristers and most work,

however, the correct practical discipline is to make fresh disclosure when each new brief is

offered or arrives in chambers. Apart from anything else, this focuses the mind and facilitates

proof of a costs agreement for each separate matter. The case in which a barrister overlooks

disclosure will be the one that goes bad.

2.2. Continuing disclosure

It will be seen that the disclosure obligations of an indirectly retained barrister under UL

s 175(2) extend to ‘the information necessary’ for the instructing solicitor to comply with his

or her updating obligations under s 174(1)(b) in relation to the barrister.21 The nature of the

barrister’s obligation is discussed above.

The updating obligation arises directly if the barrister is directly retained.

2.3. Additional disclosure before settlement: s 177

UL s 177 imposes an additional duty of disclosure to a client before settlement ‘if a law practice

negotiates the settlement of a litigious matter on behalf of a client’.22 The subject matter to be

disclosed is an estimate of the client’s own costs and of party/party costs payable or recoverable

if the proposed settlement is made. There is no requirement of writing, but no prudent lawyer

would fail to evidence the disclosure in physical form. The estimate must be given before the

settlement is ‘executed’.

Section 177(2) exempts an indirectly retained law practice, but only if the retaining law practice

actually makes the disclosure to the client before settlement is executed. This means that, if a

20 This follows from UL s 174(1) rather than s 175.

21 Compare LPA 2004 s 316.

22 Compare LPA 2004 s 313.

10

barrister ‘negotiates the settlement’ of a case, the barrister must either make disclosure to the

client or ensure that the solicitor does so.23

2.4. Exemption concerning commercial or government entities: s 170

Subject to a few exceptions with respect to costs agreements, UL s 170 stipulates that Pt 4.3

‘does not apply to’ a ‘commercial or government client’ or a third party payer that would satisfy

the definition of that term if it were a client.24 For brevity, it will be convenient to refer to such

a client or payer as a commercial or government entity.

The characteristics that qualify for commercial or government status are set out at length in

s 170(2) and UGR r 71. Examples include a law practice (this covers cases where the law

practice is itself a client or incurs a payment obligation other than on behalf of a client – cf

s 171(3)), a public company (in the company law sense – broadly, a listed company) and its

subsidiaries, a foreign company and its subsidiaries, a government authority and a State owned

corporation or enterprise.

2.5. Failure to disclose: s 178

UL s 17825 prescribes consequences of a law practice contravening the disclosure obligations

of Part 4.3 Div 3 (ss 174, 175, 176, 177).

(1) If a law practice contravenes the disclosure obligations of this Part—

(a) the costs agreement concerned (if any) is void; and

(b) the client or an associated third party payer is not required to pay the legal costs

until they have been assessed or any costs dispute has been determined by the

designated local regulatory authority; and

(c) the law practice must not commence or maintain proceedings for the recovery of

any or all of the legal costs until they have been assessed or any costs dispute has been

determined by the designated local regulatory authority or under jurisdictional

legislation; and

(d) the contravention is capable of constituting unsatisfactory professional conduct or

professional misconduct on the part of any principal of the law practice or any legal

practitioner associate or foreign lawyer associate involved in the contravention.

(2) In a matter involving both a client and an associated third party payer where disclosure has

been made to one of them but not the other, this section—

(a) does not affect the liability of the one to whom disclosure was made to pay the

legal costs; and

(b) does not prevent proceedings being maintained against the one to whom the

disclosure was made for the recovery of those legal costs.

(3) The Uniform Rules may provide that subsections (1) and (2)—

(a) do not apply; or

(b) apply with specified modifications—

in specified circumstances or kinds of circumstances.

23 See Appendix 1: Precedents for Barristers’ Costs Agreements and Disclosures, precedents 1.2A cl 6

and 1.2B cl 8 (instructing solicitors’ warranties). The warranties are intended for protection of the

barrister, but a prudent barrister will personally ensure that disclosure is given or remind the solicitor to

do so.

24 Compare LPA 2004 s 312 and other provisions referring to a ‘sophisticated client’.

25 Compare LPA 2004 s 317.

11

UL s 178(1)(a) deprives the law practice of the general contractual enforceability of the

agreement under s 184 and the rebuttable ‘fair and reasonable’ presumption in s 172(4). The

reference to the designated local regulatory authority in para (b) is to the Legal Services

Commissioner,26 who has limited power to determine costs under UL Part 5.2 (s 292; cf s 289).

By para (c), the law practice has no right to sue, or perhaps loses that right, unless and until

costs have been quantified by assessment or other indicated process, and the client or associated

third party payer has a corresponding defence. A few issues remain to be determined. What

happens, for example, if a law practice initially fails to disclose the required estimate, but

remedies that failure part-way through its retainer? Do paras (b) and (c) apply to all costs in

the matter, or only those incurred under default of disclosure? Is it possible to enter into an

enforceable costs agreement after the default of disclosure is remedied? There is some support

for this proposition in relation to earlier legislation.27

The power of dispensation under s 178(3) has not yet been exercised.

The practical capacity for s 178 to apply to an indirectly retained law practice is constrained by

the more limited disclosure obligations that apply. The independent failure of an instructing

solicitor to give required disclosure does not affect a barrister whom the solicitor has retained.

2.6. Uplift fees

UL s 182 requires a conditional costs agreement that includes an uplift fee to include

information and estimates concerning the uplift. This provision is outside Div 3.28

Contravention does not attract s 178, but has its own consequences (see below, Conditional

costs agreements with uplift fees: ).

2.7. Progress reports

A client may require a written progress report covering unbilled work in progress, in which

case a conventionally retained barrister is required to give necessary information to the

instructing solicitor. This requirement29 is outside Div 3, and does not engage s 178.

2.8. Associated third party payers: s 176

UL s 17630 provides:

(1) If a law practice is required to make a disclosure to a client of the law practice under section

174 or 175, the law practice must, in accordance with subsection (2), also make the same

disclosure to any associated third party payer for the client, but only to the extent that the details

or matters disclosed are relevant to the associated third party payer and relate to costs that are

payable by the associated third party payer in respect of legal services provided to the client.

(2) A disclosure under subsection (1) must be made in writing—

(a) at the time the disclosure to the client is required; or

26 AA s 11.

27 Hughes v Daley [2013] NSWSC 806; appeal allowed on other grounds, Daley v Hughes (2014) 86

NSWLR 729. The case concerned a contracting-out provisions in the Motor Accidents Compensation

Regulation (No 2) 1999 (NSW) cl 11.

28 Compare LPA 2004 s 314, which was in the disclosure Division of that Act.

29 UL s 190. Compare LPA 2004 s 318, which was in the disclosure Division of that Act but was

probably not a ‘disclosure’ provision.

30 Compare LPA 2004 s 318A.

12

(b) if the law practice only afterwards becomes aware of the legal obligation of the

associated third party payer to pay legal costs of the client—as soon as practicable after

the practice became aware of the obligation.

It appears that this does not apply to an indirectly retained barrister in respect of a person who

is an associated third party payer in relation to the barrister (e.g. under a costs agreement

between them) because the barrister’s only obligation under s 174 or 175 is to make disclosure

to the instructing solicitor (s 175(2)). Be that as it may, prudence dictates that a barrister in

such circumstances should ensure that the third party payer is appraised of information that is

relevant and material to his or her obligation.

2.9. Other disclosure requirements

Other disclosure requirements apply outside the general provisions discussed above. For

example, regulations made under AA Sch 1 cl 4 require further initial disclosure before a law

practice enters into a costs agreement with a ‘client’ in connection with a claim for ‘personal

injury damages’ within that Schedule,31 and regulations under cl 5 require additional disclosure

after receipt and before response to an offer of compromise on such a claim.32 These are

particularly important for personal injury practitioners. Unfortunately, they are also drafting

disaster areas. They are considered in more detail below.33 There are special provisions in

other areas which will not be considered here, such as motor accidents and workers’

compensation.

3. COSTS AGREEMENTS The general rules relating to costs agreements are set out in UL Part 4.3 Div 4 (ss 179 – 185).

There are no corresponding regulations in UGR.

3.1. Why bother with a costs agreement?

As has been mentioned, UL requires disclosure. It does not require a costs agreement. So why

bother?

There are three principal reasons for a barrister to have a costs agreement.

The first is to engage the benefit of explicit contractual enforceability in UL s 184 and the

rebuttable ‘fair and reasonable’ presumption in s 172(4). The costs agreement removes any

lingering doubt about the ability of a barrister to sue in the ordinary courts as an alternative to

the assessment process, which usually results in a certificate that is enforceable as a judgment.34

31 AR cl 28, replacing LPR 2005 cl 116 under LPA 2004 s 339. Broadly speaking, this requires timely,

written disclosure of the limiting effect of AA Sch 1 and the practical, financial consequences if the

contracting out provision Sch 1 cl 4 applies.

32 See AR cl 29, formerly LPR 2005 cl 117. Broadly speaking, this requires timely, written advice

concerning the offer and its potential cost consequences, if declined.

33 See note 36 and corresponding text.

34 The institution of a costs assessment does not stop the ordinary limitation period from running

because the assessment is not a proceeding for the purposes of the Limitation Act 1969 (NSW); this

creates the risk that the limitation period may expire before the assessment is finalised. See Cockburn v

Shehadie [2013] NSWSC 758; Coshott v Lenin [2007] NSWCA 153; Coshott v Barry [2012] NSWSC

850.

13

The second is to make explicit the personal, contractual liability of an instructing solicitor.

Typically, barristers do not consider themselves to have cost recovery rights against a client.35

They rely not on the credit of clients, but of their instructing solicitors, whose job it is to satisfy

themselves to the extent they feel necessary concerning the client’s credit, and whose

professional rules as well as the long history of professional relations between solicitors and

the bar provide a basis for a professional and now also a legal obligation to pay a conventionally

retained barrister.

The third reason is to take advantage of exemptions from limits that otherwise apply to costs in

various classes of personal injury cases. AA Sch 1 cl 4 is one such provision. It provides relief

from limits that otherwise apply under Sch 1 to the remuneration of a law practice. Others may

be found elsewhere, such as in clause 11 of the Motor Accidents Compensation Regulation

2005.

The application of the exemption in AA Sch 1 cl 4 is problematic because it refers only to ‘costs

payable as between a law practice and the practice’s client to the extent that recovery of those

costs is provided for by a costs agreement that complies with Division 4 of Part 4.3 of the Legal

Profession Uniform Law (NSW)’. The clause is badly drafted. Its author has forgotten that

New South Wales has a divided legal profession. To justify its literal application to barrister’s

fees under a conventional solicitor/barrister costs agreement, one may argue that a

solicitor/client costs agreement which provides for the client to pay the solicitor for barrister’s

fees incurred, preferably by reference to the actual barrister/solicitor costs agreement, is

sufficient to bring the barrister’s fees billed to the solicitor under the costs agreement with the

client.36

3.2. Costs agreements generally: s 180

As has been mentioned, the term ‘costs agreement’ is not defined in UL. A working definition

may be inferred from the context and the terms of UL Pt 4.3 Div 4 to the effect that a costs

agreement is a contract between a law practice and another permitted party37 which provides

for the payment and/or quantification of legal costs payable to the law practice by the other

party for legal services provided by the law practice to a client. It will be recalled that the term

‘legal costs’ is defined to mean

(a) amounts that a person has been or may be charged by, or is or may become liable to pay to,

a law practice for the provision of legal services; or

(b) without limitation, amounts that a person has been or may be charged, or is or may become

liable to pay, as a third party payer in respect of the provision of legal services by a law practice

to another person—

including disbursements but not including interest …38

There are few rules surrounding costs agreements as such. By UL s 179, ‘[a] client of a law

practice has the right to require and to have a negotiated costs agreement with the law practice’

– this seems to be a hollow ‘right’, since neither client nor law practice can force the other to

enter into a professional relationship on terms to which the other does not agree. By s 180, the

agreement ‘must be written or evidenced in writing’ but ‘may consist of a written offer that is

accepted in writing or (except in the case of a conditional costs agreement) by other conduct’,

35 As to which under LPA 1987 see Burbidge v Wolf [2008] NSWSC 60.

36 See further Appendix 1: Precedents for Barristers’ Costs Agreements and Disclosures under the

heading ‘1.3 Personal Injury Cases Note’ and precedents 1.3.1 and 1.3.2.

37 See text to n 7 above. Permitted parties are: directly retained law practice, indirectly retained law

practice, client, associated third party payer. One of the parties must be the law practice whose costs

are the subject of the agreement.

38 UL s 6(1).

http://www.legislation.nsw.gov.au/xref/inforce/?xref=Type%3Dact%20AND%20Year%3D2014%20AND%20no%3D16a&nohits=yhttp://www.legislation.nsw.gov.au/xref/inforce/?xref=Type%3Dact%20AND%20Year%3D2014%20AND%20no%3D16a&nohits=y

14

and it ‘cannot provide that the legal costs to which it relates are not subject to a costs

assessment.’ These rules do not apply to a contract with a commercial or government client.39

One may observe here the distinction between a retainer and a costs agreement. The retainer

creates the barrister’s agency for the client and gives rise, in conjunction with ethical rules, to

the barrister’s obligation to provide services. The costs agreement is separate, and governs the

obligation to pay. This distinction incidentally illustrates why a barrister’s bill to a local

solicitor acting for an overseas client may be GST free:40 the barrister provides services to the

client under the retainer, but bills the solicitor under the costs agreement. It is possible, though

unusual, to have an indirect retainer (barrister/solicitor) and a direct costs agreement

(barrister/client).

The legislation does not say that a contract which is (or contains) a costs agreement cannot

contain other contractual subject matter. There is no evident policy reason why a costs

agreement should be confined in such a way. Indeed, UL s 195(1)41 explicitly provides for

interest to be charged ‘in accordance with the costs agreement’, but the definition of ‘legal

costs’ excludes interest. The better view is that a costs agreement may be part of a contract that

deals with other matters.

Nobody would be surprised to learn that a costs agreement cannot contract out of the assessment

scheme.42 What may surprise some readers is that the commercial or government entity

exemption excludes access to assessment altogether.43

A compliant costs agreement is overridden by any applicable and mandatory fixed costs

provisions. It is also overridden by the primary requirement in s 172 that a law practice limit

its charging to costs that are ‘no more than fair and reasonable in all the circumstances’ and that

in particular are ‘proportionately and reasonably incurred [and] proportionate and reasonable

in amount.’ The law practice has the benefit of a presumption that contracted fees or rates are

fair and reasonable, but the presumption is rebuttable. The onus of rebuttal rests on the party

challenging the presumption.

A costs agreement may provide for the charging of interest, although interest may also be

charged without a costs agreement.44

3.3. Conditional costs agreements: s 181

UL s 181 permits conditional costs agreements in certain circumstances. There are two obvious

reasons why a barrister might consider entering into a conditional costs agreement. One is to

facilitate an uplift fee, which provides consideration in return for the uncertainty of

remuneration and for delaying payment to the end of the case. The other is for the explicit

comfort of the client and/or the instructing law practice – in effect, this formalises the practice

that applied to speculative litigation before 1 July 1994.

Section 181 is best understood by reading it:

39 UL s 170.

40 See A New Tax System (Goods and Services Tax) Act 1999, section 38-190 as it applies to supplies of

legal services to a non-resident who is not in Australia. This is illustrated by the judgment of Gzell J in

Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 60 NSWLR 425. The case only discusses

solicitors’ work, presumably because the parties raised no separate issue concerning counsel.

41 Following LPA 2004 s 321(2).

42 UL s 180(4).

43 This follows from the wording of UL s 170, and appears to be deliberate.

44 See UL s 195 and the Billing Checklist para [11] p 38 below. The precedent agreements in

Appendix 1 provide for the charging of interest.

15

(1) A costs agreement (a conditional costs agreement) may provide that the payment of some

or all of the legal costs is conditional on the successful outcome of the matter to which those

costs relate.

(2) A conditional costs agreement must—

(a) be in writing and in plain language; and

(b) set out the circumstances that constitute the successful outcome of the matter to

which it relates.

(3) A conditional costs agreement must—

(a) be signed by the client; and

(b) include a statement that the client has been informed of the client’s rights to seek

independent legal advice before entering into the agreement.

(4) A conditional costs agreement must contain a cooling-off period of not less than 5 clear

business days during which the client, by written notice, may terminate the agreement, but this

requirement does not apply where the agreement is made between law practices only.

(5) If a client terminates a conditional costs agreement within the cooling-off period, the law

practice—

(a) may recover only those legal costs in respect of legal services performed for the

client before that termination that were performed on the instructions of the client and

with the client’s knowledge that the legal services would be performed during that

period; and

(b) in particular, may not recover any uplift fee.

(6) A conditional costs agreement may provide for disbursements to be paid irrespective of the

outcome of the matter.

(7) A conditional costs agreement may relate to any matter, except a matter that involves—

(a) criminal proceedings; or

(b) proceedings under the Family Law Act 1975 of the Commonwealth; or

(c) proceedings under legislation specified in the Uniform Rules for the purposes of

this section.

(8) A contravention of provisions of this Law or the Uniform Rules relating to conditional costs

agreements by a law practice is capable of constituting unsatisfactory professional conduct or

professional misconduct on the part of any principal of the law practice or any legal practitioner

associate or foreign lawyer associate involved in the contravention.

Conditionality may apply to some or all of the subject costs. This allows a good deal of

flexibility. Costs of a particular kind may be made conditional, or a particular fraction of costs,

or costs above a certain threshold, and so on.

The requirements for a cooling-off period, signature by the client and a statement of client’s

rights make little sense in the absence of an uplift, but they are required nonetheless.45

The requirement of signature by the client may create practical problems if the contract is

between barrister and solicitor. If the contract provides for an uplift, the barrister should ensure

that the client has signed, whether as party or as client confirming and approving the solicitor’s

contract, before the barrister does any more than nominal or urgent preliminary work.

Otherwise, see the workaround solution proposed in Appendix 1: Precedents for Barristers’

Costs Agreements and Disclosures precedent 1.2B cl 4.

45 A cooling-off period is not required in a contract between barrister and a retaining solicitor who is

not also the client.

16

3.4. Conditional costs agreements with uplift fees: s 182

UL s 182 permits a capped premium or uplift in a conditional costs agreement. An estimate

and explanation of major variables must be in the agreement.46

Uplifts were first permitted under the 1993 reforms by LPA 1987 s 187, but were significantly

restricted by LPA 2004 s 324(1), which prohibited an uplift in relation to a claim for damages.

With UL, the pendulum has swung back in a laissez faire direction. Section 182 provides:

(1) A conditional costs agreement may provide for the payment of an uplift fee.

(2) If a conditional costs agreement relates to a litigious matter—

(a) the agreement must not provide for the payment of an uplift fee unless the law

practice has a reasonable belief that a successful outcome of the matter is reasonably

likely; and

(b) the uplift fee must not exceed 25% of the legal costs (excluding disbursements)

otherwise payable.

(3) A conditional costs agreement that includes an uplift fee—

(a) must identify the basis on which the uplift fee is to be calculated; and

(b) must include an estimate of the uplift fee or, if that is not reasonably practical—

(i) a range of estimates for the uplift fee; and

(ii) an explanation of the major variables that may affect the calculation of

the uplift fee.

(4) A law practice must not enter into a costs agreement in contravention of this section or of

the Uniform Rules relating to uplift fees.

Civil penalty: 100 penalty units.

A similar concept under the former Victorian statute of a ‘premium’ on costs ‘otherwise

payable’ was explored in Equuscorp Pty Ltd v Wilmoth Field Warne (2007) 18 VR 250 and

Coadys v Getzler (2007) 18 VR 288. As there is no evident difference in meaning between a

‘premium’ and an ‘uplift’, the decisions should be accepted as determinative for UL s 182.

Both concerned solicitors who had contracted to take a case on a contingency basis, such that a

fraction of their usual fees would be payable regardless of outcome, but their full fees would be

payable if the case succeeded. The full fees were considerably more than 125% of the fraction

payable in any event; the applicable statute capped lawful premiums at 25%. At first instance

it was held in both cases that the difference amounted to excessive uplifts, which were non-

recoverable. In both cases, the Court of Appeal held that there was no premium. The decisions

on appeal were clearly right. The first instance decisions had taken an untenable view of the

meaning of ‘otherwise payable’. Fees are not ‘otherwise payable’ if they would be payable in

the event of failure; they are ‘otherwise payable’ if they would have been hypothetically payable

under the cost agreement without the success condition and the uplift, but are only payable

under the actual agreement in the event of success.

Section 182 allows a law practice to make part only of its costs conditional, and there is no

ethical objection to allowing part of one’s normal fees to be conditional. A case may have

apparent merit, but the litigant may not have the means fully to fund the case, and the case may

be too big for the practitioner (particularly a sole practitioner, such as a barrister) to risk

remaining entirely unpaid for what might be months of work. To charge (say) a quarter or a

half of one’s normal fees unconditionally and the balance conditionally in such circumstances

is ethically unobjectionable and facilitates access to justice. As to the ethical propriety of the

46 UL s 182 is among the handful of provisions that fully apply in relation to a commercial or

government entity.

17

practices just described, see Clyne v NSW Bar Association (1960) 104 CLR 186 at 203,

Schokker v FCT (No. 2) (2000) 106 FCR 134 at 139-9; Ladd v London Road Car Co (1900)

110 LT Jo 80; Sievwright v Ward [1935] NZLR 43 at 48 per Ostler J; Re Sheehan (1990) 13

Fam LR 736 at 749; and cf. Wentworth v Rogers; Wentworth & Russo v Rogers [2006] NSWCA

145 at [120], [121], [128]. The outcome in Equuscorp and Coadys is consistent with these

principles.

The two Victorian decisions involved genuine discounts, and confirm that a discount is not a

premium. This raises the question whether s 182 may effectively be circumvented by setting a

particularly high contract rate and making part of the fee conditional and part non-conditional.

The answer, it is suggested, is that a high nominal contract rate runs the risk of falling foul of

the s 172 prohibition on overcharging, with potential disciplinary as well as costs consequences.

An otherwise compliant costs agreement creates only a rebuttable presumption of being fair

and reasonable.

3.5. Prohibition of contingency fee agreements: s 183

UL s 183 prohibits a costs agreement ‘under which the amount payable to the law practice, or

any part of that amount, is calculated by reference to the amount of any award or settlement or

the value of any property that may be recovered in any proceedings to which the agreement

relates’ other than by adopting ‘an applicable fixed costs legislative provision.’ Read literally,

this fails to discriminate between a case where a law practice takes a personal, proprietary or

quasi-proprietary interest in the outcome of proceedings beyond what would be a usual and

proper fee, and a case where a lawyer contracts for a proper fee, but agrees to take less if the

case ends badly. It is salutary to recall that distinctions based on value of outcome were

embedded in Court scales before deregulation. The interpretation placed on the corresponding

Victorian provision in Equuscorp Pty Ltd v Wilmoth Field Warne (2007) 18 VR 250 and Coadys

v Getzler (2007) 18 VR 288 was that it only applied where the calculation of costs was based

on the value of the judgment, etc, not where variations in that value might affect the amount of

costs payable in another way, such as by serving as a condition for part of the costs to be

payable.

A provision explicitly capping fees so as not to exceed the proceeds of the action (however

defined) or a proportion thereof is ethically unobjectionable if the fees before application of the

cap are calculated on the normal professional basis. The cap in such a case only serves to

protect the client from having a bill that eats up or exceeds all the proceeds of the action. It

may be hoped that s 183 is not so literally interpreted as to outlaw such practices.

3.6. Form

UL ss 180 and 181 contain formal requirements relating to writing47 and signature. The

requirements of the latter section are more stringent.

3.7. Contravention of Division 4: s 185

UL s 185 stipulates consequences of breaching Division 4. First, a costs agreement ‘that

contravenes, or is entered into in contravention of’ any provision of the Division is void. In

most cases, the law practice is still entitled to quantum meruit or scale, but its entitlement is

capped at the amount it could have recovered under the contract. Secondly, if the law practice

has been overpaid relative to that entitlement, it must repay the excess. Thirdly and specifically,

contravention of s 182 precludes recovery of an uplift and requires repayment if it has been

received. Fourthly, a law practice that breaches s 183 ‘is not entitled to recover any amount in

47 The Interpretation of Legislation Act 1984 (Vic) s 38 defines ‘writing’ as including ‘all modes of

representing or reproducing words, figures or symbols in a visible form’. That Act, not its New South

Wales counterpart, governs the interpretation of UL: UL s 7; cf AA ss 4, 5.

18

respect of the provision of legal services in the matter to which the costs agreement related and

must repay any amount received’. This means that the law practice is working for nothing.48

Some interesting questions remain. For example, what happens if a law practice discovers a

Division 4 error before completing a case, discloses it fully, and tries to repair it by a fresh costs

agreement? What if the error was a breach of s 183? Must the law practice complete the case

unpaid? Does a breach of s 183 prevent recovery of disbursements as well as profit costs?

As one would expect, contraventions of Division 4 can qualify as professional misconduct or

unsatisfactory professional conduct.49

3.8. Costs agreements and commercial or government entities: s 170

As has been mentioned, UL s 170 says that Part 4.3 does not ‘apply to’ a commercial or

government entity, subject to a list of specific exceptions, all of which are in Div 4 and relate

to costs agreements. The excepted provisions are ss 181(1), (7) and (8), 182, 183 and 185(3),

(4) and (5):

UL s 181(1) provides: ‘A costs agreement (a conditional costs agreement) may provide that the payment of some or all of the legal costs is conditional on the successful

outcome of the matter to which those costs relate.’ The listed exceptions in s 170 do

not include s 180, which expressly permits costs agreements between a law practice

and a client or associated third party payer and then subjects that permission to certain

conditions. The inference is that a conditional or unconditional costs agreement with

a commercial or government client (or a third party payer with the same characteristics)

does not require statutory permission, and is free of the constraints otherwise imposed

by s 180 and s 181(2) – (6).

The reference to UL s 181(7) applies the prohibition on conditional costs agreements by reference to particular classes of subject matter (crime, family law, etc) to

agreements with a commercial or government entity.

The reference to UL s 181(8)50 has the effect that a contravention of such provisions of UL and the Uniform Rules as apply to a law practice in respect of a commercial or

government entity is capable of attracting disciplinary censure of those involved.

UL s 182 provides that a costs agreement may provide for the payment of an uplift fee, subject to certain restrictions. The inference is that both the permission and the

restrictions apply to a costs agreement with a commercial or government entity,

including consumer protection measures requiring special disclosure and estimation.

The prohibition on contingency fees in UL s 183 applies to a costs agreement with a commercial or government entity.

The reference to UL s 185(3) is ancillary to engagement of s 182: contravention of that section in dealings with a commercial or government entity denies recoverability of a

forbidden uplift and requires its repayment, if received, in the same way as in respect

of an ordinary client or payer.

48 See Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd (No 4) [2011] NSWSC 720.

49 See UL ss 181(8), 182(4), 183.

50 ‘A contravention of provisions of this Law or the Uniform Rules relating to conditional costs

agreements by a law practice is capable of constituting unsatisfactory professional conduct or

professional misconduct on the part of any principal of the law practice or any legal practitioner

associate or foreign lawyer associate involved in the contravention.’

19

The reference to UL s 185(4) is ancillary to engagement of s 183: contravention of that section denies the right of the law practice to remuneration and requires repayment, if

received, in the same way as in respect of an ordinary client or payer.

The reference to UL s 185(5) should be interpreted as conferring a statutory cause of action in debt on a commercial or government entity entitled to repayment under

s 185(3) or (4).51

4. OTHER MATTERS

4.1. Billing

The following notes supplement the Billing Checklist for Barristers (Appendix 2 below, p 37;

see also the Billing Boilerplate, p 40).

There has never been a freestanding obligation on lawyers to deliver a bill. Formal billing

requirements are imposed as a precondition to the lawyer’s right to sue for recovery of legal

costs. The position was summarised by Young J in Smits v Buckworth (22/9/97; BC9704802)

and not doubted on appeal (A-G v Smits (1998) 45 NSWLR 521):

[T]he only significance that a bill of costs has is that the solicitor may not sue under s192 [of

the 1987 Act] until he has served a signed bill of costs. The process of assessment of costs is,

however, one which may be carried out though there is not a bill of costs in the ordinary form

at all.’

The corresponding present rule (UL s 194) prohibits legal proceedings for recovery unless the

law practice has given a compliant bill. The rules relating to form and content of actionable

bills are in UL Part 4.3 Div 5 (ss 186 – 193). The most important of these are noted in the

Billing Checklist. In addition, the law practice must wait, in most cases, until 30 days have

passed since the giving of the bill. If the defendant has made a timely written request for an

itemised bill, the 30 days are counted from the giving of that bill. If the costs are the subject of

a costs dispute before the Legal Services Commissioner as designated local regulatory authority

under UL Pt 5.2, the law practice need only wait until the authority has closed or resolved the

dispute.

A person who is entitled to apply for assessment of costs to which a bill relates – in the case of

a barrister’s bill, this usually means the instructing solicitor, not the client, unless the barrister

is acting on direct retainer or has made a costs agreement with the client – can require an

itemised bill by written request within 30 days of being given a lump sum bill, in which case

the billing law practice has 21 days to comply (UL s 187). The best advice for barristers is

always to bill in itemised form.

UL s 186 provides that ‘[a] bill may be in the form of a lump sum bill or an itemised bill’, but

UL does not define either of those terms. It follows that ‘lump sum bill’ and ‘itemised bill’ in

UL have their ordinary meaning, having regard to the context and purpose of UL. The ordinary

contextual meaning of an ‘itemised bill’, it is suggested, is a bill that identifies the legal services

for which costs are claimed, identifies the amount claimed, and breaks both down into items.

The nature and extent of the description and breakdown may need further qualification. It may

be inferred that their purpose is to facilitate assessment, or to facilitate a decision by the person

to whom the bill is addressed whether to apply for assessment. The latter is probably the

51 Section 185(5) makes similar provision in respect of sub-s (2), but that sub-section is not engaged in

respect of a commercial or government client.

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preferable interpretation.52 The ordinary contextual meaning of a ‘lump sum bill’, it is

suggested, is a bill that identifies the legal services for which costs are claimed and identifies

the amount claimed without being an itemised bill.

In the ordinary case where a barrister is retained by a solicitor and bills on a time costing basis,

there is much to be said for the view that a bill is itemised if it briefly describes the work done

and the total time taken day by day in a way that relates to the billing criteria. Historically it

has not been though necessary in New South Wales for an itemised barrister’s bill provide the

same level of detail as a solicitor’s bill. The solicitor to whom a typical barrister’s bill is

addressed is a professional who can interpret and judge the reasonableness of the barrister’s bill

from a position of professional knowledge and with the benefit of the principal file. It remains

to be seen whether this approach will also be applied to a barrister’s bill to a non-professional

client. See ‘Form, Content and Service of the Bill’, p 37 below.

It is useful to compare LPA 2004 which also used and, in s 302, defined the concepts of an

itemised bill (one which ‘specifies in detail how the legal costs are made up in a way that would

allow them to be assessed under Division 11’ of Pt 3.2) and a lump sum bill (one which

‘describes the legal services to which it relates and specifies the total amount of the legal costs’).

These are similar to definitions now found in UGR for the purposes of those Rules,53 but that

cannot affect their meaning in UL. It offered no guidance about the nature or degree of detail

that ‘would allow’ the costs to be assessed and thereby satisfy the test of itemisation. It should

not be assumed that a bill would have been insufficiently itemised just because further

submissions might or would probably be made or details given if the bill were taken to

assessment. Few if any assessments take place without such a process. I am not aware of any

authority under the 2004 Act that would have imposed more onerous billing requirements on

barristers than had for many years been regarded as normal and sufficient.54

It has never been permissible for a law practice to bill for drawing a bill (other than a party/party

bill, of course). See UL s 191.

52 This interpretation is suggested by Florence Investments Pty Ltd v HG Slater and Co [1975] 2

NSWLR 398 and Action Australia Pty Ltd v Frankel (Supreme Court of New South Wales, Barr AJ,

unreported, 23 December 1994).

53 The definitions in UGR cl 5(1) in the following terms: ‘In these Rules: … itemised bill means a bill

that specifies in detail how the legal costs are made up in a way so as to allow costs to be assessed.

lump sum bill means a bill that describes the legal services to which it relates and specifies the total

amount of the legal costs.’ The definition of ‘itemised bill’ is not particularly helpful, at least in New

South Wales. The process of assessment contemplates a dialogue between the parties and the costs

assessor. The notion of a bill ‘made up in a way so as to allow costs to be assessed’ should not be

interpreted as requiring the bill to be capable of assessment without more information. It should be

sufficient that the bill has a format which is broadly adapted to assessment.

54 Barristers’ bills to solicitors were generally regarded as meaningful and sufficient (assuming a billing

basis referable to hourly and daily rates) if there was a separate entry for each day (or for each task, if a

particular large task runs over several days) that contained enough information for the solicitor to

identify, in the case of hourly billing, the overall nature of the task or tasks done on the particular day

and the time taken on that day (or the total time taken on the particular task and the days over which it

was done) – for example: ‘1 April 20xx, Preparation for hearing, 5h, $[5 x hourly rate]’. In the case of

daily billing, the usual practice was to identify the task(s) and the date in a way that related to the daily

billing basis – for example: ‘2 April 20xx, Appearance on hearing, $[daily rate]’. This reflects the

exigencies of legal practice. The barrister does not retain the brief, but sends it back to the solicitor. If

the instructing solicitor takes the barrister to assessment, the principal evidentiary documents are in the

solicitor’s hand. The instructing solicitor knows the case, holds the principal file, and controls what

interlocutory tasks are sent to the barrister. The solicitor is in a better position to understand a

relatively terse barrister’s bill than a lay client would be if the solicitor rendered a similarly terse bill of

the solicitor’s services to the client. See also the reference to LPR 2005 cl 111B in the Billing

Checklist para [5] p 37 below.

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4.2. Payments in advance

The Billing Checklist refers to the limited regulatory exception under AR cl 15 to the general

prohibition on barristers receiving fees in advance (para [18] p 39). This regime is more

stringent than its predecessor under LPR 2005 cl 106A. Few barristers, if any, are likely to find

it practicable to comply with its requirements.

The legitimate goal of payment in advance is security of payment. That goal must be pursued

by other means.

Where a barrister is briefed by a solicitor who does not maintain a trust account, a work-around

solution is available. If the solicitor receives a bank cheque or a series of bank cheques from

the client on instructions (preferably irrevocable) that the cheque is charged with payment of

the barrister’s fees and is to be paid to the barrister when the relevant work has been done and

a bill presented to the solicitor, the cheque qualifies as ‘transit money’, defined as ‘money

received by a law practice subject to instructions to pay or deliver it to a third party, other than

an associate of the law practice’.55 As such, although transit money is a species of trust money,

it does not attract trust account obligations to the solicitor,56 but must be dealt with in

accordance with the relevant instructions.57 This is not ideal, but it works for some

practitioners. A barrister who wants to use this method should make provision for it in his or

her costs agreement.58

4.3. Recovery

Apart from negotiation, mediation and the assistance of the Bar Association, barristers may

consider four courses of action that may lead to fee recovery from a defaulting solicitor:

conventional debt recovery litigation, assessment, a statutory demand, and professional

complaint.

If litigation is pursued, the barrister must bear in mind that non-compliance with the Div 5

requirements relating to bills59 and any failure of Div 3 disclosure60 will be a complete defence

to the action.

Assessment is often the best and most practical option. A certificate of determination can be

enforced as if it were a judgment.61 The topic is a large one, and will not be elaborated here.

Statutory demand under the Corporations Act 2001 (Cth) is only relevant if the solicitor law

practice is incorporated. It should only be used if it is clear that there is an undisputed debt.

Some barristers report that they have obtained payment orders against defaulting solicitors in

the context of professional complaint procedures. It is obvious that a barrister should not make

a professional complaint against a solicitor lightly or without fair warning, and that such

complaint should not be made if the solicitor has disputed the bill and the dispute is not

obviously groundless.

55 UL s 128. The barrister cannot be an ‘associate’ of the solicitor law practice, but that should never

be the case anyway.

56 UL ss 136, 137, 155(4).

57 UL s 140.

58 See precedent 1.2A, cl 7 on p 24 below. This clause contemplates that the solicitor has a trust

account, but may be modified to suit the circumstances.

59 UL s 194.

60 UL s 178.

61 See AA ss 70(5), 71(3), 73.

APPENDIX 1: PRECEDENTS FOR BARRISTERS’ COSTS

AGREEMENTS AND DISCLOSUR