What are my costs disclosure requirements under the Legal Profession Act 2008 (LPA)?

Section 260 of the LPA sets out the matters that must be disclosed to a client. If the practice is itself retaining another law practice on behalf of the client, it is obliged to provide the information specified in sub-sections 260(1)(a), (c) and (d) in relation to the other law practice to the client (see section 261 of the LPA).
Disclosure is to be made either before being retained or as soon as possible after being retained by the client (see section 262 of the LPA).
Disclosure of the legal costs incurred or payable by a client is also required when settlement of a litigious matter is negotiated and prior to actual settlement (see section 264 of the LPA).
Where the costs agreement includes an uplift fee, the client must, prior to entering into the agreement, disclose the practice's legal costs, the uplift fee and the reasons why the uplift fee is warranted (see section 265 of the LPA).
The disclosure obligations are continuing obligations, requiring practitioners to disclose substantial changes to a client, whenever such occur (see section 267 of the LPA).

What are the consequences of failure to disclose?

A failure to make the necessary disclosures required by the LPA results in the client not being liable for the legal fees unless and until those costs are assessed by the Court under section 288 of the LPA, and prevents the law firm from taking action to recover its fees (see section 268 of the LPA).

When is disclosure NOT required?

Disclosure under sections 260 and 261 of the LPA is not required when:
  • The total legal costs, excluding disbursements, are not likely to exceed $1,500 (exclusive of GST) or the prescribed amount (no amount is currently prescribed in the regulations) (see section 263(2)(a) of the LPA);
  • The client has already received the disclosure in the preceding 12 months, and the client has agreed to waive the right to disclosure, and a principal of the practice decides on reasonable grounds that further disclosure is not warranted (see section 263(2)(b) of the LPA);
  • If the client is: 
    • a law practice or an Australian legal practitioner;
    • a public company or a subsidiary of a public company, a large proprietary company, a foreign company or registered Australian body;
    • a financial services licensee;
    • a liquidator, administrator or receiver;
    • a partnership that provides on professional services and has more than 20 members or would be a large proprietary company if it were a company;
    • a proprietary company formed for the purposes of carrying out a joint venture, if any shareholder would be a person to whom disclosure was not required;
    • an unincorporated group of participants in a joint venture, if any shareholder would be a person to whom disclosure was not required and the remainder have waived their right to disclosure;
    • a Minister of the Crown in right of a state or the Commonwealth, a government department or public authority of a state or the Commonwealth; (see section 263(2)(c) of the LPA).
  • If the legal costs to be paid or the basis for their calculation have been agreed as a result of a tender process (see section 263(2)(d) of the LPA);
  • If the client will not be required to pay legal costs (i.e. pro bono work) (see section 263(2)(e) of the LPA);
  • In any other circumstances prescribed by the regulations (see section 263(2)(f) of the LPA).
Regulation 81 has prescribed as further exceptions to the disclosure requirements a client that is an overseas registered foreign lawyer or practice, or a client that is a corporation with a share capital where those shares are held beneficially for a state, Territory or the Commonwealth.

What are Conditional Costs Agreements?

The LPA permits Conditional Costs Agreements, whereby the legal costs payable are conditional on the successful outcome of the matter to which the costs relate (see section 283 of the LPA).
Conditional Costs Agreements are not permitted for:
  • criminal proceedings; or
  • proceedings that relate to child protection, custody, guardianship or adoption; or
  • proceedings under the Family Court Act 1997 or
  • proceedings under the Children and Community Services Act 2004; or
  • proceedings under the Family Law Act 1975, Migration Act 1958 or Child Support (Assessment) Act 1989; or
  • proceedings prescribed by the regulations (none are currently prescribed).
Conditional Costs Agreements have to contain the details set out in section 283(3) of the LPA. Conditional Costs Agreements must have at least a 5 business day "cooling off" period (see section 283(3)(e) of the LPA).

Are Contingency Fees Permitted?

Contingency fees (where the amount payable by way of legal costs is calculated by reference to the value of the subject matter of any proceedings) are still prohibited by the LPA (see section 285 of the LPA).

Can Costs Agreements be set aside?

The Supreme Court retains its power to set aside any costs agreement if it forms the view that the costs agreement is not fair or reasonable (see section 288 of the LPA).

What must be included in a bill?

Section 291 of the LPA sets out what must be included in every bill rendered by a practice to a client other than a "sophisticated client".
A "sophisticated client" is defined in section 252 of the LPA as a client to whom, because of section 263(2)(c) or (d), disclosure under sections 260 or 261(1) is not required.
The costs assessment provisions in Part 10, Division 8 of the LPA provide for a taxing officer of the Supreme Court to assess client bills and determine what legal costs are recoverable from and payable by a client (see section 295 of the LPA).
An application for costs to be assessed can be made any time within 12 months after the bill was rendered. Bills may be assessed out of time for clients other than sophisticated clients (see section 295(7) of the LPA).