News — THE IMPORTANCE OF UPDATING YOUR COSTS AGREEMENT

Things have changed in the last 15 years. Clients may well have looked upon their lawyers as trusted and long-term components of their business endeavours; that is changing.

 

Written by Dr Stephen Shaw BA LLB (Hons) – October 2018

 

Some 15 years ago I was giving a talk on steps a firm could take to make costs recovery on a client-initiated taxation more secure.  A senior lawyer took exception to some of my suggestions and said words to this effect “This is all just work, work that is not needed to advance the client’s interests and work the client has to pay for. I have been practicing for 35 years and nobody has ever taxed one of my bills."

He was, in a lot of ways, right. It does take work to make sure a file evidences all the work done on a file, and the reasons why the work was done. Some of that work, file maintenance, may be recovered from the client (see for instance the Legal Profession (Supreme Court) (Contentious Business) Determination 2016, Item 32) and it is a pretty fair bet that most clients would not mind if it was not done and not charged for.  Those same clients would be even happier if they challenged the bill. However, as he noted, clients did not challenge bills very often.

Things have changed in the last 15 years. Clients may well have looked upon their lawyers as trusted and long-term components of their business endeavours; that is changing.  Clients took a bill to taxation if they thought they had been taken advantage of, rather than as a tactical move. More and more clients, perhaps especially relatively sophisticated ones, now see their lawyers as just another variable cost. They are willing to change lawyers regularly and, to the point of this short article, pay less for services if there is a way of doing so. Seeing costs assessment under the LPA is such a way and it is becoming more common for clients to do so.

Lawyers are results oriented.  They take on a job, and, usually, do the right set up, with a valid costs agreement and sufficient costs disclosure.  That done, they move forward, working to solve their client’s problems and further their client’s interests. They may, and often do, fail to keep their costs agreements and costs disclosures up to date.

One common problem is a ‘general advice’ retainer.  The costs agreement that reflects such a retainer can become seriously out of date if that general advice flows on to litigation and other works, but it may never be updated. If the costs agreement is for general advice and the costs disclosure is not regularly updated the client will have strong grounds for having a bill of costs reduced back to scale.

Costs disclosure is probably the less problematic of the two possible issues.  A competent lawyer should be on top of costs disclosure as an ongoing obligation and be updating the client whenever it seems further costs are going to be incurred. Section 267 of the LPA makes it very clear that a lawyer must give notice in writing if there is going to be any substantial change from the initial or earlier disclosed costs.  A lawyer or law firm that fails to give proper and ongoing disclosure can suffer serious financial consequences and the court may consider that failure as constituting unsatisfactory professional conduct or professional misconduct. But this is now trite law and lawyers should know their responsibilities and keep up to them.

A costs agreement that starts out reflecting a retainer for general advice and that is not updated when the works move beyond (and often well beyond) that stage does not look as obvious a problem as is failure to provide disclosure. However, he or she may find that if the client decides to seek taxation that the works on file, having been billed and paid for months or even years, are not within the scope of the costs agreement. If the court makes that finding then the subsequent works, the works that flowed from and after the general advice, will only be recovered at scale. This could entail the law firm returning a substantial sum to the client, and in some cases, could extend to disciplinary action if the Client has substantially overpaid.

For the reasons above law firms should have systems in place that ensure not only that cost disclosure is reasonably accurate and ongoing, but also to make sure that costs agreements accurately reflect the work that the firm is doing for the client.  Coulson Legal is able to help you put such systems in place and should be your first contact if a client does choose to have your bill assessed.