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Abraham, Romaine --- "Costs column: Managing clients' exposure to barristers' fees" [2021] PrecedentAULA 47; (2021) 165 Precedent 47

MANAGING CLIENTS’ EXPOSURE TO BARRISTERS’ FEES

By Romaine Abraham

Typically, a barrister is engaged by a solicitor, on a client’s instructions and on behalf of a client. In Dimos v Hanos & Egan,^[1] Gillard J stated:

‘[A] client who retains the services of a solicitor, engages the solicitor to provide professional services for him. In providing those services, the solicitor may advise the client that it is necessary to brief a barrister to provide specialist services ... Retention of a barrister is, in part, satisfaction of the provision of legal services by the solicitor. In the absence of any contrary evidence, the retention of the barrister would result in a contract between the barrister and the solicitor’.^[2]

The usual position in an indirect retainer arrangement is that, subject to contrary evidence regarding the nature of the contractual relationship, the solicitor is liable for the fees owed to the barrister and the client is liable for indemnifying their solicitor for that amount.^[3] This arrangement has serious implications for solicitors should a dispute arise regarding costs. Where costs disclosure is a basic step to ensure recovery of costs, it is important to ensure compliance with disclosure obligations by both the solicitor and the barrister.

REGULATIONS FOR LEGAL COSTS

In Victoria and NSW, legal costs are governed, respectively, by Part 4.3 of the Legal Profession Uniform Law Application Act (Vic) and the Legal Profession Uniform Law (NSW) (both referred to hereafter as the Uniform Law).^[4] The areas that Part 4.3 of the Uniform Law cover include costs disclosure, costs agreements, billing and costs assessments.^[5]

COSTS AGREEMENTS AND COSTS DISCLOSURES

There is a fundamental distinction between a costs disclosure and a costs agreement. A costs agreement is a contract;^[6] a costs disclosure is a communication of information on costs from one person to another and does not require a contractual agreement.^[7] A costs disclosure is not tantamount to a costs agreement, nor is a costs agreement a costs disclosure.^[8]

Importantly, under the Uniform Law, a contractual agreement is permitted but a costs disclosure is required.^[9] The client of a law practice has the right to require and to have a negotiated costs agreement with the law practice.^[10] Although the Uniform Law does not contain a definition of a costs agreement, s3.4.2 of the Legal Profession Act 2004 (Vic) and s302 of the Legal Profession Act 2004 (NSW) both state that this is an agreement about the payment of legal costs.

GENERAL DISCLOSURE OBLIGATIONS (DIRECT RETAINER)

To understand the disclosure obligations owed by a barrister in an indirect retainer relationship, it is important to be conscious of the disclosure obligations (both initial and ongoing) owed by a law practice to a client in a direct retainer arrangement. Where a client directly retains a law practice (a solicitor or barrister), the law practice must comply with the disclosure obligations contained in s174(1) of the Uniform Law:

• A law practice must, when or as soon as practicable after instructions are initially given, provide the client with information disclosing the basis on which legal costs will be calculated, and with an estimate of total legal costs.^[11]

• When there is any significant change to anything previously disclosed, or as soon as practicable thereafter, a law practice must provide the client with information disclosing the change. This must include information about any significant change to the legal costs that will be payable by the client.^[12]

Additionally, the disclosure as to the basis on which legal costs will be calculated and an estimate of the total legal costs must include information regarding the rights of the client to:

• negotiate a costs agreement with the law practice;

• negotiate the billing method;

• receive a bill from the law practice and request an itemised bill if the bill is not itemised or is only partially itemised; and

• seek assistance from the designated local regulatory authority if there is a dispute as to legal costs.^[13]

The Legal Services Council has expressed the view that an estimate of total legal costs as required by s174(1)(a) of the Uniform Law is:

‘... a reasonable approximation of the total costs that a client is likely to have to pay in the matter for which instructions have been given, expressed as a single figure, from time to time ... The definition of total legal costs in this context includes professional fees, any disbursements and GST, which should be separately identified, but not interest ... [W]here a costs agreement includes an uplift fee, that fee should be included as part of the estimate of total legal costs, with the circumstances in which it would be payable explained to the client.’^[14]

A disclosure that is made under s174 of the Uniform Law must be made in writing.^[15] If a practitioner fails to meet their disclosure obligations, they are precluded from recovering their costs until their bill has been assessed or any costs dispute has been determined by the designated local regulatory authority.^[16]

DISCLOSURE OBLIGATIONS OF AN INDIRECTLY RETAINED BARRISTER

Importantly, the disclosure obligations owed by an indirectly retained law practice are less onerous than the obligations owed by a law practice that is directly retained.^[17] The indirectly retained law practice (the barrister) must give the retaining law practice (the solicitor) the information necessary for the retaining law practice to disclose to the client the basis on which legal costs will be calculated and the estimate of total legal costs.^[18] An indirectly retained law practice must also give the retaining law practice information regarding any significant change to the basis of charging or the estimate of total legal costs, when or as soon as is practicable after there is any significant change.^[19]

Furthermore, an indirectly retained law practice, such as a barrister retained by a solicitor on behalf of a client in the usual manner, does not have to make initial disclosure to the client directly.^[20] The obligation to the client to disclose the basis on which legal costs will be calculated and the estimate of total legal costs in relation to an indirectly retained law practice falls on the first law practice retained by the client.^[21]

Accordingly, a solicitor must have direct knowledge of the barrister’s basis of charging in order to comply with their obligation to disclose this to their client. Arguably, a solicitor does not need an estimate of their total legal costs from the barrister in order to disclose an estimate to their client. This would be the case where the solicitor has express understanding of the barrister’s proposed terms and basis of charging, and where the amount of work undertaken by the barrister is directed and controlled by the solicitor.^[22] A solicitor may employ their own professional experience, their direct knowledge of the matter and their personal preferences in managing a matter to calculate an estimate of the barrister’s fees.^[23] A solicitor may also expressly request assistance from the barrister in order to formulate an estimate of their total legal costs.^[24]

CONCLUSION

As noted above, the usual position in an indirect retainer arrangement is that, subject to evidence to the contrary regarding the nature of the contractual relationship, the solicitor is liable for the fees owed to the barrister, with the client liable for indemnifying their solicitor for that amount. It is therefore important to make every effort to ensure that both the solicitor and barrister are safeguarded against a failure by the client to pay. Compliance with costs disclosure obligations will reduce the risk of ‘bill shock’ and of a consequent costs dispute. As good practice, a solicitor should obtain funds from a client before a barrister is retained, to protect against non-payment.

Romaine Abraham is the Principal Costs Lawyer and Manager of LIV Costs Lawyers, a department of the Law Institute of Victoria.

^[1] [2001] VSC 173.

^[2] Ibid, [100].

^[3] In Queensland, provided a valid costs agreement exists, the engagement of a barrister on behalf of a client results in a contractual relationship between the barrister and the solicitor: Legal Profession Act 2007 (Qld), s322.

^[4] General rules regulating legal costs in these jurisdictions are also found in the Legal Profession Uniform General Rules 2015 (NSW) (the Uniform Rules), pt 4.3; the Legal Profession Uniform Law Application Act 2014 (Vic); the Legal Profession Uniform Law Application Act 2014 (NSW), pts 6 and 7; and the Legal Profession Uniform Law Application Regulation 2015 (NSW), pts 5 and 6.

^[5] In the other jurisdictions, relevant provisions regarding solicitor/own client legal costs are contained in the Legal Profession Act 2006 (ACT), pt 3.2; the Legal Profession Act 2006 (NT), pt 3.3; the Legal Profession Act 2007 (Qld), pt 3.4; the Legal Practitioners Act 1981 (SA), sch 3; the Legal Profession Act 2007 (Tas), ch 3; and the Legal Profession Act 2008 (WA), pt 10.

^[6] ML Brabazon SC, ‘Barristers’ fees: Law and practice 2016’ (Presented on 13 February 2016, NSW Bar Association) 3, <https://nswbar.asn.au/docs/professional/prof_dev/BPC/course_files/Barristers_Fees_2016.pdf>.

^[7] Ibid.

^[8] Ibid.

^[9] Ibid. A costs disclosure is not required to be made under s174(1) if the total legal costs in the matter (excluding disbursements and GST) are not likely to exceed the ‘lower threshold’ as specified in the Uniform Rules, above note 4.

^[10] Legal Profession Uniform Law (NSW) (Uniform Law), s179.

^[11] Ibid, s179(1)(a).

^[12] Ibid, s179(1)(b).

^[13] Ibid, s179(2)(a)(i)–(iv).

^[14] Legal Services Council, Guideline – Costs Estimates – LSC 01/2016 (11 March 2016) <https://www.legalservicescouncil.org.au/Documents/Guidelines%20and%20Directions/LSC-Guideline-and-Direction-Costs-Estimates.pdf>.

^[15] Uniform Law, above note 10, s174(6).

^[16] Ibid, s178.

^[17] Legal Services Council, above note 14, guideline 4.

^[18] Uniform Law, above note 10, s175(2).

^[19] Ibid, s175(1).

^[20] Ibid, s175(2).

^[21] Ibid, s175(1).

^[22] ML Brabazon SC, above note 6, 8.

^[23] Ibid.

^[24] Ibid.