Legal costs…what are they and how are they charged?

The most common question I’m asked as a lawyer in relation to legal costs is, “what percentage will you take?”

20 Jan

The short answer is; law firms in Australia are prohibited from charging legal fees which are calculated based upon a percentage of the value of your claim or your recovery amount.   We can only charge for work that has actually been done or services that have been performed.

The way in which legal costs are charged can vary depending upon the nature of your legal matter.

To begin with, it’s important to note that legal costs are made up of two parts: –

1. Professional fees – this relates to work undertaken by the law firm on your behalf. It includes for instance, reviewing documents, providing you with advice and preparing letters or Court documents.
2. Disbursements – this is money paid to a third party by the law firm on your behalf in order to advance your legal matter. It includes for instance, court fees or fees payable to a medical professional for an expert report.    Generally, disbursements are on-charged to you ‘at cost’.

So how can legal fees be charged in Australia? 

-Fixed Fee. This involves an agreement between you and the law firm to set a fixed price for the provision of legal services.  Fixed fee arrangements most often apply to legal matters where the work required to be undertaken is clearly defined and the process for undertaking the work is relatively certain.  For instance, Maddens Lawyers offers fixed fee arrangements for the preparation of wills and conveyancing work.

-Hourly Rates. The most common way in which legal costs are charged is calculated based upon an hourly rate.  In this scenario, each person working on your legal matter records time for the task they’re undertaking.  The charge for professional fees is then determined based upon each person’s hourly rate.  A more experienced lawyer’s hourly rate is generally higher than a less experienced lawyer or a law clerk.

Time is generally recorded in 6 minute ‘units’.  This means if a lawyer spends 5 minutes making a telephone call, you will be charged for 1 ‘unit’ of time.

When charging on this basis a law firm is required to provide you with an estimate of the total legal costs at the outset.  You are also entitled to an itemised tax invoice which lists the tasks undertaken by the law firm and the time, or number of ‘units’, spent on each task.

Hourly rates are generally charged where the nature and amount of work required to be undertaken is less certain and it is not possible or practicable to provide a ‘fixed fee’.

-Scale. Where your legal matter involves litigation or Court work, professional fees may be calculated based upon the Court’s ‘scale of costs’.  The scale of costs is a schedule which sets an amount that can be charged for each task undertaken.  For instance, amounts are set for preparing a letter or attending at Court.  Each court has a different ‘scale of costs’ which is reviewed by the Court annually. 

 The ‘scale of costs’ also provides for loadings or increases to be applied to the rates allowed for each task.  Loadings may be applicable in instances where your legal matter is complex or requires particular expertise.

What about ‘No-win, no-fee’ agreements?

‘No win, no -fee’ arrangements mean that you will not be charged professional fees (and in some instances, disbursements) unless the law firm is able to achieve a successful outcome in respect of your legal matter.

Maddens Lawyers recognises that in some instances, people who have been injured or wronged are concerned about obtaining legal advice because they cannot afford to pay legal fees in the absence of a positive outcome on their claim.  ‘No win, no fee’ arrangements assist in access to justice by ensuring that people are not prohibited or discouraged from bringing a valid claim.

Maddens Lawyers may offer ‘no win, no fee’ arrangements for personal injury claims, will disputes and class actions.

Under a ‘no win, no fee’ agreement, legal fees are typically charged according to an hourly rate or the relevant Court’s ‘scale of costs’.  Lawyers are still not permitted to charge a percentage of your claim or recovery amount under a ‘no win, no fee’ agreement.  In most instances, an ‘uplift’ or premium is applied to the legal fees on account of the risk taken by the law firm to act on a ‘no win, no’ fee basis.

Under the Legal Profession Uniform Law (Vic) lawyers must meet various requirements when it comes to disclosing and charging legal costs.  These requirements are aimed at ensuring the way in which law firms disclose and charge legal costs is as clear as possible.

If you have any queries or concerns about legal costs or would like to enquire about the way in which we can assist you, we encourage you to contact us on 1800 815 228.