Legal costs
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After you formally agree to hire a lawyer (ideally in writing), they must give you a written costs disclosure statement as soon as possible, unless your total estimated legal costs are likely to be less than $750 (excluding GST and disbursements).
The costs disclosure statement must:
explain how the lawyer will charge you for your matter (the billing method) – for example, this may be a fee calculated on the basis of time spent or an agreed fee based on value or tasks completed (see ‘How solicitors charge’, below);
provide you with an estimate of the total legal costs you will need to pay (including GST and disbursements); and
include information about your rights to: negotiate the costs agreement and billing method;
receive a bill and ask for an itemised (i.e. broken down) bill (see ‘How solicitors charge’, below); and
ask for the VLSB+C’s help if you dispute the costs charged by your lawyer.
negotiate the costs agreement and billing
method;
– receive a bill and ask for an itemised (i.e. broken
down) bill (see ‘How solicitors charge’, below); and
– ask for the VLSB+C’s help if you dispute the costs
charged by your lawyer
Updated costs disclosure
If there is any significant change to the information your lawyer has given you about the costs you will be charged, they must update you in writing.
Before you finalise any legal matter, your lawyer must give you a reasonable estimate of the total legal costs you will have to pay. This should include any legal costs of another party and any payments you should receive from another party. These costs may be paid as part of a court order or an agreement settling the dispute.
Consent and understanding
Your lawyer must take all reasonable steps to make sure you understand and consent to the course of action they’re recommending for your matter and to the estimated costs involved. You should have a clear written description of the work they will be doing for you. If you don’t understand what this description means, it’s important to ask your lawyer to explain it to you using plain language.
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Lawyers must not charge more than fair and reasonable legal costs. The law sets out the factors that must be considered when determining whether costs are fair and reasonable, including:
the level of skill, experience, specialisation and seniority of the lawyer(s) working on the matter;
the level of complexity, uniqueness and difficulty of the issues involved;
how much the matter is of public interest;
the labour and level of responsibility involved; and
the circumstances; for example:
the urgency of the matter and amount of time spent on it;
the time and place where the legal work was carried out;
the number and importance of any documents involved;
the quality of the completed work; and
the retainer and instructions (stated or implied) given for the matter.
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A solicitor’s bill is in two parts. First, there is the solicitor’s professional costs – the fee for their services to complete the work (e.g. meetings, communicating with you and others, carrying out research, writing letters, lodging documents and representing you in court). Second, there are expenses called ‘disbursements’, which are costs the solicitor has paid to third parties on your behalf (e.g. court filing, barrister’s fees, bank charges, travel expenses, stamp duty, courier’s fees, attendance fees to give or collect documents, photocopying fees etc.). The professional costs can be calculated in different ways, including time costing, item-by-item, fixed or agreed fees, conditional fees and subscription fees.
A solicitor may ask you to make a payment before they start working on your matter (see ‘Payment in advance’, below).
A solicitor must not accept money for the payment of their bill until the bill has been given to you and a certain period of time has passed, as set by the Uniform Law.
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Most lawyers charge according to how much time they spend working on your matter. Where a lawyer agrees to charge an hourly rate (a flat fee per hour of work), they must tell you what that rate is and how they will apply it. The amount charged can depend on the seniority and experience of the lawyer (e.g. a junior lawyer may charge less per hour than a principal lawyer).
An hourly rate is charged in ‘units’. Usually, each unit is six minutes. This means that a lawyer can charge for the full six minutes even if the piece of work took three minutes. However, this is subject to the overall costs being fair and reasonable.
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In this method of charging (also known as ‘charging on scale’), a flat fee is charged for each item of work that’s carried out (e.g. issuing a summons, preparing an affidavit, making a photocopy). These amounts are added together to make up the total amount charged. This way of charging is common in court cases. The amount that can be charged for each item is set out in a court’s scale of costs and varies according to which court your case is heard in. On 1 January 2025, a new scale of costs was introduced. If you’re not sure if these changes will impact you, ask your lawyer.
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In the fixed or agreed fee method of charging, fees are based on the entire matter, or particular stages or milestones of work completed (rather than each item of work carried out). Examples include preparing a will or a property transfer, or lodging divorce applications in court. Fixed fees are becoming more common in cases involving litigation (settling a dispute in court). Depending on the legal matter, fees may be fixed by the court or by government. Fees can also be fixed by agreement between the lawyer and client, with set amounts for each stage of the matter (this is sometimes called ‘agreed pricing’ or ‘value-based costing’).
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In a conditional fees payment scheme (also known as a ‘conditional costs agreement’), you and your lawyer agree on the conditions under which you will pay your lawyer’s fees (e.g. you will pay them only if the legal action is successful). A conditional costs agreement must be in writing, and you must sign it for it to be accepted. It must also inform you of your right to seek independent legal advice before entering into the agreement.
Conditional costs agreements vary between lawyers. For example, if you lose, you may pay nothing or you may only have to pay disbursements (e.g. the cost of medical reports or photocopying fees). However, you may have to pay the legal costs of the other (successful) party. Your lawyer must make sure you understand exactly what you are agreeing to.
Alternatively, if the case succeeds, the conditional costs agreement may allow the lawyer to charge you up to 25 per cent more than their normal fee. It’s important to know that this doesn’t allow the lawyer to take any percentage of the money recovered in the case, only charge an extra percentage of their fees.
If you decide to not follow reasonable advice that your lawyer gives you, or you choose to stop working with your lawyer and want to move to another law practice, the conditional costs agreement may allow them to end the agreement and charge you for what it has cost them to work on your matter up to that point. You should also make sure that both you and your lawyer agree on what a ‘successful outcome’ means in your agreement.
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Some law practices offer subscription fees. These fees are a regular set payment, usually made monthly. Subscribers can use particular legal services within a specific scope or time period. For example, a lawyer may offer their client a set number of advice consultations per month for an agreed fee. This approach is particularly useful for clients who frequently need advice on a range of low-level legal work, such as a small business owner. For more information, see the VLSB+C website (www.lsbc.vic.gov.au/lawyers/legal-costs/innovation-pricing/subscription-pricing).
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In any matter involving court proceedings, a lawyer cannot enter into an agreement with you where the lawyer gets paid an agreed percentage of the total amount awarded to you. These fee arrangements (known as ‘contingency fees’) are not lawful in Victoria.
There is one exception. The Supreme Court is able to make what are known as ‘group costs orders’ in class actions. These orders allow lawyers of plaintiffs (parties that start legal proceedings against another party) to receive a percentage of any amount recovered in the proceedings as payment for legal costs, with all class members sharing the responsibility for paying those costs. The percentage received by a plaintiff’s lawyer is set by the court and may be varied at any time during the proceedings.
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A solicitor may ask you to make a payment before providing legal services. Any advance payment you make must be paid into a trust account (an account where a lawyer keeps money on behalf of their client). Trust accounts are overseen by the VLSB+C. Money in trust accounts can only be used in a way that the client has authorised or that’s allowed under the Uniform Law.
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If you are successful in a matter that involves litigation in a court or tribunal, the other party may be ordered to pay some of your lawyer’s costs. A lawyer’s costs depend on which court or tribunal makes the order. In the Supreme Court, County Court and Magistrates’ Court, costs are usually calculated on a ‘standard’ basis. That is, only costs reasonably incurred and of a reasonable amount are allowed.
In the Victorian Civil and Administrative Tribunal (VCAT), parties are generally expected to pay their own legal costs unless VCAT orders otherwise. VCAT may award costs if a party fails to follow a direction issued by VCAT (e.g. a direction limiting the length of submissions) or acts in a way that unnecessarily disadvantages another party.
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The bill you receive from your lawyer may be:
a ‘lump-sum bill’ – this has one total amount of legal costs, which covers all the work completed for that bill; or
an ‘itemised bill’ – this has a detailed list of the legal costs associated with every task completed for that bill.
Where the costs are based on an agreed price, an itemised bill records in more detail the tasks the lawyer carried out for your matter.
The bill must include, or be accompanied by, a written statement setting out:
the options available to you to dispute the legal costs in the bill; and
any time limits that apply to those options.
It’s important to know that:
a lawyer who charges more than a fair and reasonable amount may be guilty of unsatisfactory professional conduct or professional misconduct;
if you are given a lump sum bill, within 30 days, you can ask your lawyer to give you an itemised bill, and your lawyer must then give you an itemised bill within 21 days of your request;
your lawyer cannot sue you to recover legal costs until at least 30 days after you have been given their lump sum bill;
in certain circumstances, a lawyer can charge interest on an unpaid bill; however, the interest rate they can charge must be no more than the Reserve Bank cash rate (4.35 per cent as at 26 September 2024) plus two per cent;
if you have asked for an itemised bill within 30 days of receiving your lump sum bill, your lawyer cannot sue you to recover legal costs until at least 30 days after you have been given the itemised bill; and
your lawyer cannot sue you to recover legal costs if you have made a complaint to the VLSB+C and your dispute hasn’t been resolved.
Legal costs
Chapter: 2.1: Legal representation
Contributor: Fiona McLeay, CEO and Commissioner, Victorian Legal Services Board and Commissioner
Current as of: 1 September 2024
Law Handbook Page: 51
Next Section: Making a complaint about a lawyer
