Commentary on legal costs – a very misunderstood subject:
This firm charges on the applicable scales and does not charge “uplift fees”. We also act on a “no win no fee/deferred fee” basis where appropriate. We don’t charge contingency fees.
What do these phrases mean? … read on.
We will concentrate here on legal fees in relation to ongoing matters as the great majority of recovery actions involve either a negotiation process, litigation, or both. One off, or fixed fees, are generally not applicable in these circumstances.
Some or all legal fees are often recovered as part of the claim. In most disputes legal costs form part of the claimable damages.
What is “no win no fee”?
This is often understood to mean that the solicitor will take on a difficult or risky case with the real possibility of loss and that no fees will ever be earned.
However, in the very great majority of cases the opposite is the case. With some exceptions, solicitors will take on cases on a no win no fee basis only because they believe that there are very strong chances of the case being won. There is nothing wrong with this and it could be professional misconduct to conduct a case in circumstances where the solicitor thinks that there is little chance of success. But, it is wrong to say that risky cases are being taken on.
Accordingly, it is more accurate to say that the solicitor takes on the case on a deferred fee basis. The solicitor expects the case to be successful and is prepared to be paid at a later date.
This firm has acted in a very large number of litigation matters conducted on a no win no fee basis and the overwhelming majority have been successful. This is because cases with little chance of success are not proceeded with.
Accordingly we prefer to say that we act on a “deferred fee” basis as we expect any ongoing matter to be successful, and the only risk taken is that fees will be paid at the conclusion of the matter.
It may take some time/research to get it to the point of being able to judge whether the claim has prospects for success.
What are “uplift fees”?
Where a solicitor conducts a matter on a no win no fee/deferred fee basis (in our rules called a “conditional fee”) the rules also provide that an “uplift” fee may be charged. This fee can be up to 25% of the fees that would otherwise be charged. For example, if the fees are calculated to be $10,000, the solicitor would be entitled to charge (up to) an additional $2,500 as the uplift fee (upon successful conclusion) . This is sometimes confused with “contingency fees”, but contingency fees are based on a percentage of the amount recovered. Contingency fees are illegal in Victoria.
Our rules do not give any rationale for why an uplift fee can be charged, but presumably the rationale is that the solicitor is taking on risk and should be entitled to charge an additional amount because of this risk. But, as explained above, with very few exceptions solicitors do not take on cases they do not believe are going to be successful. If there was any risk, or at least a substantial risk of the case not being successful, the solicitor will simply not take it on. Again, there is nothing wrong with this, but at the same time where there is no risk, or very little risk, why should there be an entitlement to an additional fee for risk?
It is for this reason that we do not charge uplift fees. We do not think they are fair to the client.
Also, uplift fees cannot be recovered from the losing party.
Can legal costs be recovered?
Where formal proceedings are instituted in a court, the general rule is that the losing party will pay the winning party’s costs. Costs are always within the discretion of the court, but invariably the court follows this rule and awards cost to the wedding party.
Although quite a complicated topic, it is usually not possible to recover 100% of legal costs, but usually the greater proportion of a party’s legal costs can be recovered.
In some jurisdictions, for example VCAT, costs do not always form part of claims, and each party would have to bear their own legal costs. But VCAT can order costs when it is appropriate and fair to do so.
What are “contingency fees”?
As indicated above, these are based on a percentage of the amount recovered in the claim. From what one reads and sees on television they are common in America. They are illegal in Victoria. The only additional charge that can be charged to a client is the uplift fee.
Does a solicitor have to disclose what the legal fees will be?
Yes, a solicitor in Victoria is bound to provide the client with a written estimate of what the likely costs will be in a matter, and this must be provided as soon as practicable. This is called a Costs Disclosure Statement. This is required in all matters where the fees are likely to be greater than $750 (exclusive of GST).
Does a solicitor have to enter into a costs agreement with the client?
If a solicitor charges on any other basis than the applicable court and other scales, a costs agreement must be entered into. Such an agreement will specify how the solicitor will charge. This will in the majority of cases be on an hourly basis.
This firm charges on scale, and accordingly it is not necessary for us to enter into a formal costs agreement. However, we must in all cases provide the costs disclosure statement giving the estimate of what the likely fees will be.
This brings attention to the difference between a costs agreement and costs disclosure. The former provides information about how a matter will be costed (for example fixed fee or an hourly basis), the latter an estimate of what the costs will actually be.
Scale will almost always work out to be less then costs calculated on an hourly basis. If an order is made by a court that a party can recover costs from the losing party, then the calculation of those recoverable costs must be on scale.
What are these scales?
Each court has a scale of costs which must be used where there is no costs agreement entered into with the client. The scales are based on item by item charging, that is, each item of work is allocated a particular charge, so much to read a document, so much to write a letter, et cetera. Some items are based on time (that is, on an hourly, or part hourly basis) but most are not, most have a fixed fee for a particular type of work.
The solicitor can charge up to the scale amount, but no more (without a costs agreement).
Accordingly, as a matter progresses the costs will accumulate according to what is done. It is very easy to verify costs when scale is used because the work done can be matched against the scale. It is much more difficult to verify work performed on an hourly basis.
Also, when scale is used it is more likely that the recovery of costs from the losing party will more closely match what the solicitor’s costs actually are. There is more likely to be a fuller/better recovery of costs.
- We charge on scale
- We will work on a deferred fee basis
- We will provide an estimate of costs at the start
- We will not charge any uplift fees
- Legal costs can be recovered from another party
- We put all our efforts into resolving a dispute as quickly as possible.