Barristers Fees: Law and Practice 2016

Transcription

1 Barristers Fees: Law and Practice 2016 M L Brabazon SC Presented 13 February 2016, NSW Bar Association, Ballina Liability limited by a scheme approved under Professional Standards Legislation.

2 Contents 1. Introduction, Concepts and Overview CONCEPTS: RETAINER, DISCLOSURE, AGREEMENT CONCEPTS: LAW PRACTICE, CLIENT AND THIRD PARTY PAYER OVERVIEW Disclosure GENERAL INITIAL DISCLOSURE OBLIGATIONS: SS 174, CONTINUING DISCLOSURE ADDITIONAL DISCLOSURE BEFORE SETTLEMENT: S EXEMPTION CONCERNING COMMERCIAL OR GOVERNMENT ENTITIES: S FAILURE TO DISCLOSE: S UPLIFT FEES PROGRESS REPORTS ASSOCIATED THIRD PARTY PAYERS: S OTHER DISCLOSURE REQUIREMENTS Costs Agreements WHY BOTHER WITH A COSTS AGREEMENT? COSTS AGREEMENTS GENERALLY: S CONDITIONAL COSTS AGREEMENTS: S CONDITIONAL COSTS AGREEMENTS WITH UPLIFT FEES: S PROHIBITION OF CONTINGENCY FEE AGREEMENTS: S FORM CONTRAVENTION OF DIVISION 4: S COSTS AGREEMENTS AND COMMERCIAL OR GOVERNMENT ENTITIES: S Other Matters BILLING PAYMENTS IN ADVANCE RECOVERY Appendix 1: Precedents for Barristers Costs Agreements and Disclosures Barrister/Solicitor Precedents LETTER FROM BARRISTER TO SOLICITORS (UL S 175(2)) A BASIC COSTS AGREEMENT BETWEEN BARRISTER AND SOLICITORS B CONDITIONAL COSTS AGREEMENT BETWEEN BARRISTER AND SOLICITORS PERSONAL INJURY CASES NOTE PERSONAL INJURY: SOLICITOR S WARRANTY PERSONAL INJURY CLIENT S CERTIFICATION AND SOLICITOR/CLIENT AGREEMENT ABOUT BARRISTER S FEES Barrister/Client Precedents COVERING LETTER FROM BARRISTER TO DIRECT ACCESS CLIENT DIRECT ACCESS COSTS AGREEMENT BETWEEN BARRISTER AND CLIENT Basis of Charging Motor Accidents Compensation Act Cases Appendix 2: Billing Checklist for Barristers TRANSITION TO UNIFORM LAW PRELIMINARY MATTERS: TIME RECORDING FORM, CONTENT AND SERVICE OF THE BILL GST TAX INVOICES AND ADJUSTMENT NOTES PAYMENT IN ADVANCE BILLING BOILERPLATE Liability limited by a scheme approved under Professional Standards Legislation.

3 1 BARRISTERS FEES: LAW AND PRACTICE 2016 The first purpose of this paper is to provide an introduction for barristers to the general provisions of the Legal Profession Uniform Law (NSW) (UL) relating to legal costs, costs disclosure and costs agreements. It focuses primarily on the typical case where counsel is retained by a solicitor. The second purpose is to provide practical resources in the form of precedents for disclosure and agreements documents, a billing guide, and some observations on the law and practice relating to fee recovery. Part 1 introduces some basic concepts and distinctions and gives an overview of the topic. Part 2 addresses disclosure under UL Part 4.3, Division 3. Part 3 deals with costs agreements under Division 4. Part 4 considers billing, recovery and other issues. Appendix 1 reproduces precedent costs disclosure and agreement precedents with annotations as published on the NSW Bar Association website. Appendix 2 reproduces the barristers billing checklist from the same source. 1. INTRODUCTION, CONCEPTS AND OVERVIEW The Uniform Law replaced the Legal Profession Act 2004 (NSW) (LPA 2004) from 1 July 2015, 1 which had in turn replaced the Legal Profession Act 1987 (NSW) (LPA 1987) from 1 October The general rules regulating legal costs are now found in several places: UL Part 4.3, the Legal Profession Uniform General Rules 2015 (UGR) Part 4.3, the Legal Profession Uniform Law Application Act 2014 (NSW) (AA) Parts 6 and 7, and the Legal Profession Uniform Law Application Regulation 2015 (NSW) (AR) Parts 5 and 6. Previously, these rules were found in LPA 2004 Part 3.2 and the Legal Profession Regulation 2005 (NSW) (LPR 2005) Part 9. 2 There are other, more specialised rules for particular areas of practice, such as motor accidents and workers compensation cases. They are not dealt with in this paper. The regulation of legal costs may be seen as comprising rules by reference to which costs are quantified and a procedural mechanism by which that quantification is carried out. Both were heavily reformed in New South Wales by the Legal Profession Reform Act That Act was a manifestation of Parliament s faith in a free and informed market. Legal fees were deregulated, subject to consumer protection in the form of disclosure obligations. Most court scales were abolished. The old necessary and proper test for party/party fees was abandoned, and a single test of what is fair and reasonable was adopted across the board. 3 These were part 1 The main transitional rule is in UL Sch 4 cl 18. The most important question is usually whether the instructing solicitor was retained before or after the new regime commenced. 2 Before 1 October 2005, they were found in LPA 1987 Part 11 and corresponding regulations. 3 There is still some difference between party/party and practitioner/client costs because the frame of reference for deciding what is fair and reasonable is necessarily different. In theory, however, a successful litigant who conducts a case in a reasonable manner as if he or she would have to pay for it out of his or her own resources in the end should recover full practitioner/client costs under a party/party costs order. See Hon Justice Paul Brereton, Report of the Chief Justice s Review of the

4 2 of the rules by reference to which costs were quantified. The Act also established a one-stop shop for the assessment of legal costs, whether between party and party or between practitioner and client (including analogues, such as between barrister and solicitor). The system was administrative not judicial, informal to the point of being almost formless, outsourced to private providers whose status was undefined they might be described as extra-judicial but quasijudicial decision makers or independent statutory referees and it was funded on a user-pays basis through filing fees and, in some cases, the awarding of costs of assessment. Some of these reforms, particularly the idea of deregulation and the fair and reasonable test, though not the wholesale abolition of court scales, found favour in other States. The New South Wales experiment in privatised outsourcing of assessment has not been copied elsewhere. The Uniform Law is a product of the Council of Australian Governments, although to date only Victoria (the host jurisdiction) and New South Wales have taken it up. Its main function is to establish an integrated national legal profession. As such, it must deal with the regulation of practitioner/client costs. The various jurisdictions agreed on criteria for quantification in terms which reflect contractual freedom (deregulation) and consumer protection by disclosure of information. They did not agree on a mechanism for quantification of costs, which is left to local legislation. That circumstance explains the present and unavoidable proliferation of legislative instruments. The New South Wales assessment mechanism is now principally contained in and under AA. The recent Chief Justice s Review of the Costs Assessment Scheme recommended numerous reforms to the assessment scheme, some of which have been implemented. Further changes may be expected over the next few years Concepts: Retainer, Disclosure, Agreement The subjects of costs disclosure, the regulation of charging and some aspects of fee recovery fees are regulated by UL Pt 4.3. In order to achieve legal and ethical compliance as well as sound professional practice, it is necessary to maintain a clear distinction between several different but related concepts: the retainer of a law practice by a client or by another law practice on behalf of a client; the various disclosures that a law practice is obliged to make to a client, a retaining law practice, and/or a third party payer under UL Pt 4.3 Div 3; a costs agreement between a law practice and a client, a retaining law practice, or a third party payer under UL Pt 4.3 Div 4; 4 and the rights and obligations of a law practice relating to billing, assessment and recovery of professional fees and other legal costs as against a client, a retaining law practice and/or a third party payer. Costs Assessment Scheme (Supreme Court of New South Wales, 12 March 2013) < [1.1.4]: The evident goal of adopting common fair and reasonable criteria for party/party as well as for practitioner costs was that a successful litigant who conducts litigation in the manner of a hypothetical reasonably prudent person and who has the expectation of meeting their own costs from their own resources and has adequate but not extravagant means should be fully compensated for costs by an ordinary party/party costs order, citing the Attorney-General s second reading speech (Hon J.P. Hannaford MLC, NSW Legislative Council Parliamentary Debates, Hansard, 16 September 1993, at 3278). 4 The expression costs agreement is no longer defined. See heading 3.2 below. Contrast LPA 2004 s 302 which provided that, in Pt 3.2 of that Act, costs agreement means an agreement about the payment of legal costs.

5 3 A retainer is not a costs agreement. A costs agreement is not a disclosure. A disclosure is not a costs agreement. The legislation recognises a fundamental distinction between a retainer by a client of a law practice, and the case where a law practice retains another law practice on behalf of a client. 5 It is convenient to refer to these cases respectively as direct and indirect retainer. A directly retained law practice has more onerous disclosure obligations than an indirectly retained law practice. The indirectly retained law practice does not have to make initial disclosure to the client, but must give the retaining law practice the information necessary to enable it to fulfil a fraction of its disclosure obligations referable to the costs of the indirectly retained law practice. 6 The policy reason for this is obvious. The primary consumer protection provisions of the Act look to the relationship between the client and the directly retained law practice typically, the solicitors firm with principal conduct of litigious or non litigious business on the client s behalf. Both formally and in substance, the typical barrister stands at second remove from the client, being briefed and retained by the solicitor. The same is true of a solicitor acting as agent for another solicitor who has principal conduct of particular legal business for a client. It is obvious, without the statute having to say so, that no barrister or solicitor can act professionally for a client without a retainer. When a solicitor retains a barrister on behalf of a client of the solicitor, the solicitor authorises the barrister to act for the client and establishes a professional relationship between them: the solicitor s client becomes the barrister s client as well. The legislation requires disclosure and permits costs agreements; it does not require a costs agreement. There are several permitted combinations of retainer and costs agreement involving a barrister: 7 An indirect retainer and an indirect costs agreement, both of which are between barrister and instructing solicitor as principal parties. This most closely corresponds to the traditional arrangement before the 1993 reforms. The main difference is the present contractual and legal force of the solicitor s obligation to pay the barrister, which was previously binding only in honour and a matter of professional discipline. A direct retainer and a direct costs agreement, both between barrister and client. An indirect retainer between barrister and solicitor, and a direct costs agreement between barrister and client. A direct or indirect retainer and a costs agreement with a person other than client or instructing solicitor (an associated third party payer ), whether or not there is also a costs agreement with one of those persons. It should also be obvious that a costs agreement is not a disclosure, and vice versa. A costs agreement is a contract: a set of rules mutually agreed between two or more parties as the basis for regulating a relationship between them as a matter of private law. The ordinary rules of offer and acceptance apply. A disclosure is a unilateral communication from one person to another by which the first person informs the second of matters of fact and/or opinion. A lawyer who sends a document headed costs agreement to a client or instructing solicitor with a view to the latter accepting its terms makes a contractual offer. There is no costs agreement unless the offer is accepted or, as occasionally happens, further negotiation leads to agreement on some other terms. The sending of a costs agreement document may satisfy one of the sender s disclosure obligations relating to the proposed basis of charging for legal services, but the 5 UL s 175 (and previously LPA 2004 s 310). The distinction is recognised with various consequences in other provisions. 6 See UL s 175. There are other differences, but this is the greatest. 7 UL s 180(1).

6 4 disclosure obligation does not require a costs agreement, nor does it justify conflation of the two concepts Concepts: law practice, client and third party payer UL definitions are generally adopted for purposes of AA Law practice The legislation uses the concept of a law practice as a generic term for an entity that carries on domestic legal practice on its own account. Law practice is defined to include a sole practitioner and a law firm. 9 A sole practitioner is an Australian legal practitioner who engages in legal practice on his or her own account, and an Australian legal practitioner is an Australian lawyer who holds a current Australian practising certificate. An Australian lawyer is a person admitted to the Australian legal profession in this jurisdiction or any other jurisdiction. A law firm is a partnership consisting only of Australian legal practitioners [or] one or more Australian legal practitioners and one or more Australian-registered foreign lawyers. 10 It is clear enough that a barrister in private practice is a law practice, as is also a solicitor in private practice as a sole practitioner, or a firm of solicitors in private practice. The same cannot be said of a solicitor or group of legal practitioners employed as such by a large corporation or by a government department or public authority; the question in any particular case must be answered by applying the statutory criteria to the facts and circumstances of the particular case. The mere possession of an unrestricted practising certificate does not make a person a law practice Client For the purposes of UL and dependent legislation, the definition of client is attractively parsimonious: client includes a person to whom or for whom legal services are provided. 11 This takes the ordinary meaning as its starting point, but seeks to remove some perceived uncertainty by adding an inclusive definition which, while close to the ordinary meaning, is simpler and more succinct Third party payer The legislation takes the view that a non-client who incurs an obligation to pay a client s legal costs should have some protection, other than whatever general equitable or contractual obligations the client might have to protect the non-client s position and confers on a third party payer a defined subset of the rights accorded to a client. A third party payer is a nonclient who is obliged to pay legal costs or who, being obliged, has paid such costs. 13 The 8 AA s 3(2). 9 A law practice is defined in UL s 6(1) as (a) a sole practitioner; or (b) a law firm; or (c) a community legal service; or (d) an incorporated legal practice; or (e) an unincorporated legal practice. Each of these terms is separately defined. 10 These nested definitions are also in UL s 6(1). 11 UL s 6(1). 12 For considerations of the ordinary meaning of client in relation to a lawyer, see Apple v Wily [2002] NSWSC 855 at [11] (Barrett J), Maxwell v Chittick (unreported, NSWCA, 23/8/1994, Pegrum v Fartharly (1996) 14 WAR 92, Simmons v Story [2001] VSCA UL s 171 defines third party payer and related concepts; cf LPA 2004 s 302A. The third party payer provisions may be traced to amendments enacted by the Legal Profession Further Amendment Act 2006 (NSW).

7 5 obligation may be owed to the law practice or to someone else most commonly but not necessarily the client. If the third party payer s obligation is owed to the law practice (with or without some other obligee) the person in question is an associated third party payer and has, as one might expect, stronger rights than a non-associated third party payer. A law practice that retains another law practice on behalf of a client is not on that account a third party payer. 14 This avoids a solicitor being classified as a third party payer in relation to a conventionally retained barrister. A liability insurer will typically be a third party payer in relation to solicitors retained for the insured client s defence. If, as is usual, the insurer promises to pay the solicitors fees, it will be an associated third party payer in relation to the solicitor. It will also become an associated third party payer in relation to a barrister retained by the solicitors if it incurs an obligation to the barrister for the barrister s fees. If, without incurring an obligation to the barrister, the insurer incurs an obligation to the solicitors to pay the barrister s fees, the insurer will be a nonassociated third party payer in relation to the barrister and an associated third party payer in relation to the solicitors in respect of the barrister s fees. A beneficiary in a trust or estate who is dissatisfied with legal costs claimed by or paid to a law practice for services provided to the trustees, executors or deceased 15 may be expected to face considerable difficulty in qualifying as a third party payer Overview Anticipating what will follow and leaving aside the rights of third party payers, a few major propositions for barristers can be stated in summary form: Leaving aside commercial or government entities, a law practice is expressly forbidden to charge costs in excess of what is fair and reasonable in all the circumstances. 16 A compliant costs agreement is prima facie evidence that its terms are fair and reasonable, provided that the law practice has relevantly complied with its Div 3 disclosure obligations. 17 This creates a rebuttable presumption, regardless whether the issue is contested before a costs assessor or in a court. UL differs from LPA 2004, which made costs agreements enforceable but provided for them to be set aside if not fair and reasonable. Leaving aside arrangements involving a commercial or government entity as client or associated third party payer in relation to the barrister, and assuming that the barrister is retained in the usual way by a solicitor law practice on behalf of the client: o o the barrister s initial and continuing Div 3 disclosure obligations are limited, and disclosure must be made to the solicitor; the barrister s pre-settlement disclosure obligations are not limited, although compliant disclosure by the solicitor satisfies the barrister s obligation. If the client is a commercial or government client, a barrister has no Div 3 disclosure obligations, regardless whether the barrister is retained by in-house lawyers or by a law 14 UL s 171(3). 15 Beneficiaries in a deceased estate are clearly not third party payers in relation to legal costs paid by the deceased. See Allwood v Benjafield [2014] NSWCA 355 [46]. Strictly speaking, the point was conceded, not determined, but its correctness cannot be doubted. The beneficiaries success in the Court of Appeal, which managed to achieve a just result, was due to an extraordinary series of events and errors that is unlikely to be repeated. 16 UL s 172(1). 17 UL s 172(4).

8 6 practice. 18 If there is a costs agreement between them, it is enforceable without reference to the statutory fair and reasonable test in s 172 and without risk or right of costs assessment. The foregoing propositions apply mutatis mutandis in respect of a commercial or government associated third party payer that has contracted with the barrister. The alternative of accepting a retainer directly from a non- commercial or government client prima facie exposes the barrister to the full range of disclosure and regulatory obligations that apply between solicitor and client. Few barristers are likely to be comfortable with such an outcome as a general setting for the conduct of professional practice, since barristers practices are typically organized on the basis of dealing financially and contractually with other professionals. This permits counsel to maintain a relatively lean operation in chambers, and is an important structural advantage of the divided profession. Barristers in a divided profession need not duplicate the input cost of a solicitors practice. Because their overheads relate almost exclusively to the provision of their professional services rather than client-related credit management and consumer relations, their services can be offered at prices which are highly competitive relative to the level of their professional expertise. This efficiency delivers considerable public benefit, particularly when it is seen in conjunction with the more obvious public benefit that any client has access to the whole bar, regardless of the client s choice of solicitor. 2. DISCLOSURE This section focuses on the disclosure obligations under UL Part 4.3 of a barrister who is indirectly retained by a solicitor on behalf of a client. I do not propose to deal with any additional disclosure that may be required by other statutes General initial disclosure obligations: ss 174, 175 In order to understand a barrister s disclosure obligations, it is convenient to start with the solicitor s initial and continuing disclosure obligations. UL ss 174 and relevantly provide: 174 Disclosure obligations of law practice regarding clients (1) Main disclosure requirement A law practice (a) must, when or as soon as practicable after instructions are initially given in a matter, provide the client with information disclosing the basis on which legal costs will be calculated in the matter and an estimate of the total legal costs; and (b) must, when or as soon as practicable after there is any significant change to anything previously disclosed under this subsection, provide the client with information disclosing the change, including information about any significant change to the legal costs that will be payable by the client together with the information referred to in subsection (2). (2) Additional information to be provided Information provided under 18 A cut-down set of rules applies to conditional costs agreements with commercial or government clients. In the unlikely event of an uplift agreement with such a client, there are still disclosure obligations under UL s 182 in Div Compare LPA 2004 ss 309 and 310. The UL provisions are a considerable improvement, particularly in relation to a directly retained law practice.

9 7 (a) subsection (1)(a) must include information about the client s rights (i) to negotiate a costs agreement with the law practice; and (ii) to negotiate the billing method (for example, by reference to timing or task); and (iii) to receive a bill from the law practice and to request an itemised bill after receiving a bill that is not itemised or is only partially itemised; and (iv) to seek the assistance of the designated local regulatory authority in the event of a dispute about legal costs; or (b) subsection (1)(b) must include a sufficient and reasonable amount of information about the impact of the change on the legal costs that will be payable to allow the client to make informed decisions about the future conduct of the matter. (3) Client s consent and understanding If a disclosure is made under subsection (1), the law practice must take all reasonable steps to satisfy itself that the client has understood and given consent to the proposed course of action for the conduct of the matter and the proposed costs. (6) Disclosure to be written A disclosure under this section must be made in writing, but the requirement for writing does not affect the law practice s obligations under subsection (3). 175 Disclosure obligations if another law practice is to be retained (1) If a law practice (the first law practice) intends to retain another law practice (the second law practice) on behalf of a client, the first law practice must disclose to the client the details specified in section 174(1) in relation to the second law practice, in addition to any information required to be disclosed to the client under section 174. (2) If a law practice (the first law practice) retains or intends to retain another law practice (the second law practice) on behalf of a client, the second law practice is not required to make a disclosure to the client under section 174, but must disclose to the first law practice the information necessary for the first law practice to comply with subsection (1). (3) This section does not apply if the first law practice ceases to act for the client in the matter when the second law practice is retained. Other provisions of s 174 deal with thresholds below which modified disclosure rules apply. These do not affect a solicitor s obligations with respect to barrister s fees. They can modify the obligations of a directly retained barrister, but not those of one who is indirectly retained, even if he or she has a costs agreement with the client. The solicitor s disclosure obligations may be distilled to eight items of content and one item of form: Basis of charging s 174(1)(a) asap ( as soon as practicable ) after instructions Estimate of total legal costs s 174(1)(a) includes barristers fees and other disbursements; GST inclusive asap after instructions Client s rights s 174(2)(a) asap after instructions Significant changes to any of the above ss 174(1)(b), 174(2)(b) asap after change Obligation to take all reasonable steps re understanding and consent s 174(3) Basis of charging in relation to barrister s 175(1) time limit implied as none express Estimate of total legal costs in relation to barrister s 175(1) time limit implied Significant changes in relation to barrister s 175(1), 174(1)(b) time limit implied

10 8 Form: in writing s 174(6) (no express equivalent in s 175) If a non-client owes a legal obligation to the law practice to pay legal costs for legal services provided by the law practice to the client i.e. if there is an associated third party payer in relation to the law practice the law practice is required to make similar disclosure to that person to the extent that it is relevant and material to that obligation (s 176). Exemptions apply if the client is a commercial or government client or if the associated third party payer has similar commercial or government characteristics (heading 2.2 below). Leaving aside the complications of commercial or government entities and associated third party payers, the disclosure obligations of a conventionally retained barrister under UL s 175 may be distilled to the following: Information necessary re basis of charging s 175(2) timing implied Information necessary re estimate of total legal costs s 175(2) timing implied Significant changes re either of above s 175(2) timing implied There is no statutory requirement of writing here, but a prudent barrister will document all disclosures in a form that can be readily retrieved and proven. As a matter of practice management, all the documents (electronic and/or paper) relating to disclosure, costs agreements and estimation of the legal cost budget should be recorded and kept together. Dedicated legal billing software facilitates this. What is the content of an indirectly retained barrister s disclosure obligation? A solicitor needs to rely on a barrister directly for knowledge of the barrister s basis of charging. In most cases, the barrister will give that information to the solicitor case by case. If a new matter arises out of an old one (e.g. an appeal), it is prudent to treat it as if it were a fresh brief in order to ensure that the new matter is clearly within the scope of a costs agreement and to exclude any argument that the barrister has failed to give requisite disclosure. It is not necessarily the case that a solicitor needs an explicit estimate from a barrister in order to make an estimate of the barrister s fees. The amount of a barrister s fees depends to a large degree on how the work of the case is distributed between counsel and solicitor and the degree to which the solicitor chooses to rely on counsel matters that vary widely from solicitor to solicitor and even from case to case. When the barrister is retained, the solicitor will usually know more about the case than the barrister. A competent solicitor may be able to come up with a sensible estimate of counsel s fees based on the solicitor s own knowledge of the case, professional experience, and case management preferences. Such an estimate must also be subject to heavy qualifications, no matter who gives it. The better view is that necessary in s 175 refers to whatever extra the solicitor needs to be able to perform his or her obligation. In other words, the barrister s job is to top up the solicitor s knowledge to the extent that it appears deficient. On this view, a barrister who discloses his or her rates and invites the solicitor to discuss the budget for legal costs and to identify any information that the solicitor considers necessary will have a substantial measure of protection from any claim of deficient disclosure if the solicitor does not take up the barrister s invitation. (See Appendix 1: Precedents for Barristers Costs Agreements and Disclosures, precedent 1.1.) The test of necessity in s 175 must presumably be judged by reference to the content of the brief (if it has been delivered) and other relevant communications with the solicitor at or before the time for disclosure. At the least, the barrister should ensure that the solicitor is aware of the barrister s proposed terms and charges, or of the barrister s standards terms and charges for the relevant class of work, including billing. More is required if the solicitor has explicitly requested assistance with respect to an estimate of counsel s fees.

11 9 Counsel should consciously consider what is necessary for each new brief. As a matter of best practice rather than positive obligation, one should also consider what would be of best utility for the solicitor and client, and for the barrister s relationship with them. The statutory rule is a legal minimum. It does not prevent counsel from discussing likely costs beyond what is necessary, nor does it prevent the barrister from indicating estimates and updating them. The cost of litigation is usually close to a client s heart, and most solicitors appreciate a frank discussion about the budget. That discussion is best approached as an opportunity to build a good working relationship with the solicitor. The time requirement for initial disclosure by an indirectly retained law practice is implicit. The instructing solicitor should give corresponding disclosure as soon as practicable. 20 It follows that the indirectly retained barrister should make disclosure before or very shortly after the retainer. The obligation under s 175(2) arises separately and afresh for each new matter. Usually, but not automatically, it requires fresh action by the barrister. If the solicitor already knows the barrister s basis of charging and billing and requires no additional information in order to make the required estimate of counsel s fees and to work out whether any fixed costs provisions apply, no further conduct is required of the barrister to achieve compliance. A minority of barristers may find it convenient to rely on a standing arrangement with solicitors who regularly send them work. If they do so, it is important to include an explicit term in the arrangement requiring the solicitor to tell the barrister in writing if any further information is required to enable the solicitor to comply with section 175(1) for a particular matter. Any such standing arrangement should be in writing, and any changes (such as rate increases and the like) should be provided for and properly documented as they occur. For most barristers and most work, however, the correct practical discipline is to make fresh disclosure when each new brief is offered or arrives in chambers. Apart from anything else, this focuses the mind and facilitates proof of a costs agreement for each separate matter. The case in which a barrister overlooks disclosure will be the one that goes bad Continuing disclosure It will be seen that the disclosure obligations of an indirectly retained barrister under UL s 175(2) extend to the information necessary for the instructing solicitor to comply with his or her updating obligations under s 174(1)(b) in relation to the barrister. 21 The nature of the barrister s obligation is discussed above. The updating obligation arises directly if the barrister is directly retained Additional disclosure before settlement: s 177 UL s 177 imposes an additional duty of disclosure to a client before settlement if a law practice negotiates the settlement of a litigious matter on behalf of a client. 22 The subject matter to be disclosed is an estimate of the client s own costs and of party/party costs payable or recoverable if the proposed settlement is made. There is no requirement of writing, but no prudent lawyer would fail to evidence the disclosure in physical form. The estimate must be given before the settlement is executed. Section 177(2) exempts an indirectly retained law practice, but only if the retaining law practice actually makes the disclosure to the client before settlement is executed. This means that, if a 20 This follows from UL s 174(1) rather than s Compare LPA 2004 s Compare LPA 2004 s 313.

12 10 barrister negotiates the settlement of a case, the barrister must either make disclosure to the client or ensure that the solicitor does so Exemption concerning commercial or government entities: s 170 Subject to a few exceptions with respect to costs agreements, UL s 170 stipulates that Pt 4.3 does not apply to a commercial or government client or a third party payer that would satisfy the definition of that term if it were a client. 24 For brevity, it will be convenient to refer to such a client or payer as a commercial or government entity. The characteristics that qualify for commercial or government status are set out at length in s 170(2) and UGR r 71. Examples include a law practice (this covers cases where the law practice is itself a client or incurs a payment obligation other than on behalf of a client cf s 171(3)), a public company (in the company law sense broadly, a listed company) and its subsidiaries, a foreign company and its subsidiaries, a government authority and a State owned corporation or enterprise Failure to disclose: s 178 UL s prescribes consequences of a law practice contravening the disclosure obligations of Part 4.3 Div 3 (ss 174, 175, 176, 177). (1) If a law practice contravenes the disclosure obligations of this Part (a) the costs agreement concerned (if any) is void; and (b) the client or an associated third party payer is not required to pay the legal costs until they have been assessed or any costs dispute has been determined by the designated local regulatory authority; and (c) the law practice must not commence or maintain proceedings for the recovery of any or all of the legal costs until they have been assessed or any costs dispute has been determined by the designated local regulatory authority or under jurisdictional legislation; and (d) the contravention is capable of constituting unsatisfactory professional conduct or professional misconduct on the part of any principal of the law practice or any legal practitioner associate or foreign lawyer associate involved in the contravention. (2) In a matter involving both a client and an associated third party payer where disclosure has been made to one of them but not the other, this section (a) does not affect the liability of the one to whom disclosure was made to pay the legal costs; and (b) does not prevent proceedings being maintained against the one to whom the disclosure was made for the recovery of those legal costs. (3) The Uniform Rules may provide that subsections (1) and (2) (a) do not apply; or (b) apply with specified modifications in specified circumstances or kinds of circumstances. 23 See Appendix 1: Precedents for Barristers Costs Agreements and Disclosures, precedents 1.2A cl 6 and 1.2B cl 8 (instructing solicitors warranties). The warranties are intended for protection of the barrister, but a prudent barrister will personally ensure that disclosure is given or remind the solicitor to do so. 24 Compare LPA 2004 s 312 and other provisions referring to a sophisticated client. 25 Compare LPA 2004 s 317.

13 11 UL s 178(1)(a) deprives the law practice of the general contractual enforceability of the agreement under s 184 and the rebuttable fair and reasonable presumption in s 172(4). The reference to the designated local regulatory authority in para (b) is to the Legal Services Commissioner, 26 who has limited power to determine costs under UL Part 5.2 (s 292; cf s 289). By para (c), the law practice has no right to sue, or perhaps loses that right, unless and until costs have been quantified by assessment or other indicated process, and the client or associated third party payer has a corresponding defence. A few issues remain to be determined. What happens, for example, if a law practice initially fails to disclose the required estimate, but remedies that failure part-way through its retainer? Do paras (b) and (c) apply to all costs in the matter, or only those incurred under default of disclosure? Is it possible to enter into an enforceable costs agreement after the default of disclosure is remedied? There is some support for this proposition in relation to earlier legislation. 27 The power of dispensation under s 178(3) has not yet been exercised. The practical capacity for s 178 to apply to an indirectly retained law practice is constrained by the more limited disclosure obligations that apply. The independent failure of an instructing solicitor to give required disclosure does not affect a barrister whom the solicitor has retained Uplift fees UL s 182 requires a conditional costs agreement that includes an uplift fee to include information and estimates concerning the uplift. This provision is outside Div Contravention does not attract s 178, but has its own consequences (see below, Conditional costs agreements with uplift fees: ) Progress reports A client may require a written progress report covering unbilled work in progress, in which case a conventionally retained barrister is required to give necessary information to the instructing solicitor. This requirement 29 is outside Div 3, and does not engage s Associated third party payers: s 176 UL s provides: (1) If a law practice is required to make a disclosure to a client of the law practice under section 174 or 175, the law practice must, in accordance with subsection (2), also make the same disclosure to any associated third party payer for the client, but only to the extent that the details or matters disclosed are relevant to the associated third party payer and relate to costs that are payable by the associated third party payer in respect of legal services provided to the client. (2) A disclosure under subsection (1) must be made in writing (a) at the time the disclosure to the client is required; or 26 AA s Hughes v Daley [2013] NSWSC 806; appeal allowed on other grounds, Daley v Hughes (2014) 86 NSWLR 729. The case concerned a contracting-out provisions in the Motor Accidents Compensation Regulation (No 2) 1999 (NSW) cl Compare LPA 2004 s 314, which was in the disclosure Division of that Act. 29 UL s 190. Compare LPA 2004 s 318, which was in the disclosure Division of that Act but was probably not a disclosure provision. 30 Compare LPA 2004 s 318A.

14 12 (b) if the law practice only afterwards becomes aware of the legal obligation of the associated third party payer to pay legal costs of the client as soon as practicable after the practice became aware of the obligation. It appears that this does not apply to an indirectly retained barrister in respect of a person who is an associated third party payer in relation to the barrister (e.g. under a costs agreement between them) because the barrister s only obligation under s 174 or 175 is to make disclosure to the instructing solicitor (s 175(2)). Be that as it may, prudence dictates that a barrister in such circumstances should ensure that the third party payer is appraised of information that is relevant and material to his or her obligation Other disclosure requirements Other disclosure requirements apply outside the general provisions discussed above. For example, regulations made under AA Sch 1 cl 4 require further initial disclosure before a law practice enters into a costs agreement with a client in connection with a claim for personal injury damages within that Schedule, 31 and regulations under cl 5 require additional disclosure after receipt and before response to an offer of compromise on such a claim. 32 These are particularly important for personal injury practitioners. Unfortunately, they are also drafting disaster areas. They are considered in more detail below. 33 There are special provisions in other areas which will not be considered here, such as motor accidents and workers compensation. 3. COSTS AGREEMENTS The general rules relating to costs agreements are set out in UL Part 4.3 Div 4 (ss ). There are no corresponding regulations in UGR Why bother with a costs agreement? As has been mentioned, UL requires disclosure. It does not require a costs agreement. So why bother? There are three principal reasons for a barrister to have a costs agreement. The first is to engage the benefit of explicit contractual enforceability in UL s 184 and the rebuttable fair and reasonable presumption in s 172(4). The costs agreement removes any lingering doubt about the ability of a barrister to sue in the ordinary courts as an alternative to the assessment process, which usually results in a certificate that is enforceable as a judgment AR cl 28, replacing LPR 2005 cl 116 under LPA 2004 s 339. Broadly speaking, this requires timely, written disclosure of the limiting effect of AA Sch 1 and the practical, financial consequences if the contracting out provision Sch 1 cl 4 applies. 32 See AR cl 29, formerly LPR 2005 cl 117. Broadly speaking, this requires timely, written advice concerning the offer and its potential cost consequences, if declined. 33 See note 36 and corresponding text. 34 The institution of a costs assessment does not stop the ordinary limitation period from running because the assessment is not a proceeding for the purposes of the Limitation Act 1969 (NSW); this creates the risk that the limitation period may expire before the assessment is finalised. See Cockburn v Shehadie [2013] NSWSC 758; Coshott v Lenin [2007] NSWCA 153; Coshott v Barry [2012] NSWSC 850.

15 13 The second is to make explicit the personal, contractual liability of an instructing solicitor. Typically, barristers do not consider themselves to have cost recovery rights against a client. 35 They rely not on the credit of clients, but of their instructing solicitors, whose job it is to satisfy themselves to the extent they feel necessary concerning the client s credit, and whose professional rules as well as the long history of professional relations between solicitors and the bar provide a basis for a professional and now also a legal obligation to pay a conventionally retained barrister. The third reason is to take advantage of exemptions from limits that otherwise apply to costs in various classes of personal injury cases. AA Sch 1 cl 4 is one such provision. It provides relief from limits that otherwise apply under Sch 1 to the remuneration of a law practice. Others may be found elsewhere, such as in clause 11 of the Motor Accidents Compensation Regulation The application of the exemption in AA Sch 1 cl 4 is problematic because it refers only to costs payable as between a law practice and the practice s client to the extent that recovery of those costs is provided for by a costs agreement that complies with Division 4 of Part 4.3 of the Legal Profession Uniform Law (NSW). The clause is badly drafted. Its author has forgotten that New South Wales has a divided legal profession. To justify its literal application to barrister s fees under a conventional solicitor/barrister costs agreement, one may argue that a solicitor/client costs agreement which provides for the client to pay the solicitor for barrister s fees incurred, preferably by reference to the actual barrister/solicitor costs agreement, is sufficient to bring the barrister s fees billed to the solicitor under the costs agreement with the client Costs agreements generally: s 180 As has been mentioned, the term costs agreement is not defined in UL. A working definition may be inferred from the context and the terms of UL Pt 4.3 Div 4 to the effect that a costs agreement is a contract between a law practice and another permitted party 37 which provides for the payment and/or quantification of legal costs payable to the law practice by the other party for legal services provided by the law practice to a client. It will be recalled that the term legal costs is defined to mean (a) amounts that a person has been or may be charged by, or is or may become liable to pay to, a law practice for the provision of legal services; or (b) without limitation, amounts that a person has been or may be charged, or is or may become liable to pay, as a third party payer in respect of the provision of legal services by a law practice to another person including disbursements but not including interest 38 There are few rules surrounding costs agreements as such. By UL s 179, [a] client of a law practice has the right to require and to have a negotiated costs agreement with the law practice this seems to be a hollow right, since neither client nor law practice can force the other to enter into a professional relationship on terms to which the other does not agree. By s 180, the agreement must be written or evidenced in writing but may consist of a written offer that is accepted in writing or (except in the case of a conditional costs agreement) by other conduct, 35 As to which under LPA 1987 see Burbidge v Wolf [2008] NSWSC See further Appendix 1: Precedents for Barristers Costs Agreements and Disclosures under the heading 1.3 Personal Injury Cases Note and precedents and See text to n 7 above. Permitted parties are: directly retained law practice, indirectly retained law practice, client, associated third party payer. One of the parties must be the law practice whose costs are the subject of the agreement. 38 UL s 6(1).

16 14 and it cannot provide that the legal costs to which it relates are not subject to a costs assessment. These rules do not apply to a contract with a commercial or government client. 39 One may observe here the distinction between a retainer and a costs agreement. The retainer creates the barrister s agency for the client and gives rise, in conjunction with ethical rules, to the barrister s obligation to provide services. The costs agreement is separate, and governs the obligation to pay. This distinction incidentally illustrates why a barrister s bill to a local solicitor acting for an overseas client may be GST free: 40 the barrister provides services to the client under the retainer, but bills the solicitor under the costs agreement. It is possible, though unusual, to have an indirect retainer (barrister/solicitor) and a direct costs agreement (barrister/client). The legislation does not say that a contract which is (or contains) a costs agreement cannot contain other contractual subject matter. There is no evident policy reason why a costs agreement should be confined in such a way. Indeed, UL s 195(1) 41 explicitly provides for interest to be charged in accordance with the costs agreement, but the definition of legal costs excludes interest. The better view is that a costs agreement may be part of a contract that deals with other matters. Nobody would be surprised to learn that a costs agreement cannot contract out of the assessment scheme. 42 What may surprise some readers is that the commercial or government entity exemption excludes access to assessment altogether. 43 A compliant costs agreement is overridden by any applicable and mandatory fixed costs provisions. It is also overridden by the primary requirement in s 172 that a law practice limit its charging to costs that are no more than fair and reasonable in all the circumstances and that in particular are proportionately and reasonably incurred [and] proportionate and reasonable in amount. The law practice has the benefit of a presumption that contracted fees or rates are fair and reasonable, but the presumption is rebuttable. The onus of rebuttal rests on the party challenging the presumption. A costs agreement may provide for the charging of interest, although interest may also be charged without a costs agreement Conditional costs agreements: s 181 UL s 181 permits conditional costs agreements in certain circumstances. There are two obvious reasons why a barrister might consider entering into a conditional costs agreement. One is to facilitate an uplift fee, which provides consideration in return for the uncertainty of remuneration and for delaying payment to the end of the case. The other is for the explicit comfort of the client and/or the instructing law practice in effect, this formalises the practice that applied to speculative litigation before 1 July Section 181 is best understood by reading it: 39 UL s See A New Tax System (Goods and Services Tax) Act 1999, section as it applies to supplies of legal services to a non-resident who is not in Australia. This is illustrated by the judgment of Gzell J in Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 60 NSWLR 425. The case only discusses solicitors work, presumably because the parties raised no separate issue concerning counsel. 41 Following LPA 2004 s 321(2). 42 UL s 180(4). 43 This follows from the wording of UL s 170, and appears to be deliberate. 44 See UL s 195 and the Billing Checklist para [11] p 38 below. The precedent agreements in Appendix 1 provide for the charging of interest.