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Costs Agreements, Billing and Estimates

Costs Agreements, Billing and Estimates

Getting security for your fees right when it comes to enforcing.

It is not uncommon for solicitors to contain clauses in their Costs Agreements that allow them to secure payment by making their agreement joint and several to more than one entity (i.e. Company and director), incorporate a guarantee and/or a charging clause allowing the solicitor to lodge a caveat over any real property those to whom retained their services.

Whilst this sounds good in theory, the statutory requirements of the Legal Profession Uniform Law 2015 and its predecessor the Legal Profession Act 2004, ensure that to keep a caveat in place under a solicitor’s retainer, should the client issue a lapsing notice, the solicitors will need to ensure there is ample evidence of compliance with their legal obligations.

In Frontier Law Group Pty Ltd v Robert Glenn Barkman [2016] NSWSC 1542 the solicitor’s retainer stated inter alia, at clause 23:

23.   In consideration of this Costs Agreement and to better secure payment of all moneys owing by the client to this firm, the client hereby irrevocably charges in favour of this firm all of their right, title and interest in all personal property and real property that the client now holds or acquires in the future, and the client also authorises this firm to cause a caveat to be lodged in respect of all real property charged by this clause.”

The solicitor had not been paid and on the basis of the above clause lodged a caveat over real property of the client.  The client subsequently issued a lapsing notice to have the caveat removed.

The Supreme Court of NSW considered that such a clause could result in the solicitor maintaining its caveat but held, in this instance, the solicitor could not because:

  • The evidence did not establish that the work was done under the retainer (i.e. the solicitor’s retainer was not signed but he relied on the standard clause in solicitors costs agreements that if you continue to give us instructions, even though the agreement is not signed, the solicitor will consider themselves retained).
  • No evidence of issue of tax invoices to the Defendant.
  • No evidence that tax invoices that were put into evidence related to the work done under the retainer (as distinct from other work done under the retainer).

The court noted that the costs agreement in question did not appear to relate to the amount claimed in the caveat, given there were some twenty files for work done between this solicitor and this client.

Further his Honour noted the solicitor:

“took the ‘extraordinary’ step of providing a “total estimate of costs and disbursements” in a purported attempt to comply with s 174(1) (see Legal Profession Act, s 309(c)) by asserting that the total legal costs will be “between $2,200 – $55,000”. In other words, the upper limit of the amount claimed is more than twenty times the lower limit. In my view, that is on its face, so wide a range as to provide no guidance to any client and is not, on any rational basis to be described as an “estimate of the total legal costs” that complies with the legislation.”

The Court noted that in order for the solicitor to sue upon this costs agreement, a law practice must be able to surmount the prohibition in Legal Profession Uniform Law, s 194 (Legal Profession Act, s331) that it must not commence legal proceedings unless a bill has been given for legal costs and the bill complies with the requirements of “this Law and the Uniform Rules”.

His Honour stated:

“It seems impossible for the solicitor to be able to establish a right to commence these legal proceedings, unless a memorandum of costs is tendered, which, on its face, complies with the law and the Uniform Law. In this case that at least requires the bill to relate to the costs agreement for which disclosure has been given.”

The solicitor could not maintain its caveat over the property as security for his outstanding fees.

It is important to get the evidence right on such an application and like much litigation it is better to spend some time getting the retainer/costs agreement and billing systems in place and seek the advice of Pattison Hardman in that regard.