Costs Agreements: Duties for Solicitors

Costs Agreement, Retainer and Disclosure

The retainer establishes your authority to act and the work you are engaged to do. The costs agreement records the agreed charging terms. Costs disclosure gives the client the information the law requires about likely costs and their rights.

Legal costs include the solicitor’s professional fees and disbursements, such as court filing fees or an external expert’s charge. Possible adverse costs are the client’s separate exposure to paying another party’s costs under a court order. Explain that exposure separately from your firm’s estimate. The retainer defines the authorised work, while the agreement sets how that work is charged.

You can put these in one document with distinct parts. Their functions still differ. An agreed hourly rate does not, by itself, give the client an estimate of the total cost. A signed agreement cannot replace later disclosure when the estimate changes.

Under section 180 of the Uniform Law, a costs agreement must be written or evidenced in writing. An ordinary written offer can be accepted by conduct. Conditional costs agreements require the client’s signature and additional safeguards. The Uniform Law’s costs provisions distinguish these requirements.

For Victorian matters, the regulator’s disclosure guidance sets out the following thresholds. Disclosure is generally required when professional fees are likely to exceed $750, excluding GST and disbursements. The standard short form is available where those fees are unlikely to exceed $3,000. Above that amount, provide full disclosure. Statutory commercial or government clients have exemptions, so record the applicable category instead of assuming every business client qualifies.

Give required written disclosure when instructions are first given, or as soon as practicable afterwards. Explain the rights to negotiate the agreement and billing method, receive a bill and request an itemised bill. Include the local regulator’s dispute assistance.

The threshold calculation differs from the estimate you give the client. The estimate must show the expected overall cost, including disbursements and GST. Full disclosure also requires reasonable steps to establish the client’s understanding and consent to the proposed work and costs.

Incorrect: record the client’s signature as proof that every future cost is authorised.

Correct: retain the agreement and initial disclosure, then record explanations and further instructions when the proposed work changes.

Set the Scope and Charging Basis

Describe the legal work and financial analysis separately so the client can see what each charge covers. For a disputed-transfer matter, distinguish initial advice from statement analysis, correspondence and any later expert report.

A practical scope schedule can identify each work item, its charging basis, estimate and assumption. State which stage the estimate covers and what work requires a further decision. For hourly work, explain rates, billing units and who will perform it. For a fixed fee, describe the work included and how additional work will be agreed.

Show GST treatment beside fees and estimated disbursements. State billing intervals and payment arrangements consistently with the applicable law. Distinguish your firm’s analysis time from an external provider’s fee. Identify who engages the provider and who is responsible for payment. A valuation or expert opinion needs its own scope and estimate when it is a separate engagement.

FinTrace can remove hours of manual bank-statement review from that analysis stage. Its per-matter service returns a searchable ledger and findings report with source references, at a fraction of the cost of manual statement analysis. A fixed base fee plus a per-page quotation depends on scope. Record the accepted quote and your firm’s remaining legal work separately in the client’s estimate.

Conditional Costs Agreements

A conditional costs agreement makes payment of some or all legal costs depend on a successful outcome. Define that outcome precisely. Conditional charging does not remove disclosure obligations. Explain whether disbursements remain payable if the matter fails and what happens if the retainer ends early.

Under the Uniform Law, the agreement must use plain language and be signed by the client. It must state that the client has been informed of their right to seek independent legal advice. Include at least five clear business days for cooling off, except for agreements solely between law practices.

An uplift fee requires its calculation basis and an estimate. If an estimate is not reasonably practical, include a range of estimates and explain the major variables affecting the calculation. For litigation, the practice must reasonably believe success is reasonably likely, and the uplift cannot exceed 25% of otherwise payable legal costs, excluding disbursements.

Conditional agreements are prohibited for criminal proceedings and proceedings under the Commonwealth Family Law Act or Western Australia’s Family Court Act. Section 183 also prohibits costs agreements that calculate fees by reference to the amount recovered. The Legal Services Council’s costs agreement guidance explains these restrictions.

For a fictional Victorian compensation instruction, agree which legal fees become payable on the defined successful outcome. Record any permitted uplift separately from those fees. The 25% litigation uplift limit concerns otherwise payable legal costs, excluding disbursements, rather than the compensation recovered. Explain which disbursements remain payable if the claim fails and the client’s separate adverse-costs exposure. A conditional agreement therefore cannot promise that an unsuccessful claim costs the client nothing.

For an editable Victorian preparation draft, use the costs agreement and separate disclosure template. Settle the legal terms for the actual retainer before supplying the completed document.

Update Estimates When the Matter Changes

To control legal costs, assign responsibility for each stage and agree what work it includes before it starts. Monitor incurred fees and committed disbursements against that stage’s estimate. When further work is proposed, record the options and obtain the client’s instruction before authorising the additional scope. Continue any urgent protective work required by the existing retainer.

Review the estimate when new evidence changes the expected work, even if the hourly rate stays the same. Additional accounts, a large document production or a wider expert brief can alter both scope and cost.

Under section 174, disclose significant changes in writing as soon as practicable. Explain their effect on costs sufficiently for the client to decide how to proceed. An approaching invoice is a late warning if the extra work has already consumed the original estimate.

Fictional Change Record

The following example shows a scope change in a Victorian financial dispute. All amounts are fictional and include GST.

File entry	Recorded information
Original scope	Analyse two accounts and advise on disputed transfers. Estimated legal fees of $8,800 and external analysis of $1,100 give a total estimate of $9,900.
Change identified	A later production adds six accounts. Comparing transfers across the expanded bundle requires further analysis and legal review.
Revised estimate	Legal fees increase to $12,100 and external analysis to $2,200. The revised total is $14,300, an increase of $4,400.
Client communication	Written update version 2 explains the additional accounts, revised work and cost increase. It sets out an option to limit the next stage to specified transfers.
Instruction	The client asks questions, then instructs the firm to proceed with the expanded stage. The file retains the explanation, response and authorised scope.

Keep incurred costs separate from the amount expected to complete the matter. An updated total must make clear whether it includes earlier work. Record the point when the change became apparent and when the client received the explanation.

If the matter narrows or a provider’s quote falls, update the assumptions as well. For the client-facing explanation of estimates in family proceedings, use the separate guide to family law costs and disclosure.

Keep a Defensible Costs File

Keep a file that shows what the client received, understood and authorised at each stage. A signed first version alone cannot explain later work or a disputed bill.

Retain the supplied version and delivery record, the scope assumptions, evidence of acceptance and notes of explanations. Add each written update, client instruction, provider quote and bill. Record the rights information supplied with disclosure and billing, including the route for challenging costs.

The Victorian regulator’s costs agreement guidance requires fair and reasonable costs that are proportionate to the work. Agreement on a rate does not make every charge recoverable. Under the Uniform Law, the costs agreement cannot exclude costs assessment.

If a dispute arises, compare the challenged work with the authorised scope and disclosure history. Give the client a clear explanation of the bill and applicable review rights. Refer the issue promptly to the responsible principal and identify the local complaint or assessment deadlines before deciding the response.

A disclosure defect needs a separate response. Section 178 can void the agreement and prevent recovery proceedings until costs are assessed or the dispute is determined. The client need not pay those costs in the meantime. Disciplinary consequences are also possible.

Rule 72A provides limited relief. It requires reasonable steps towards compliance and rectification within 14 days after awareness of the breach. The relevant authority must also find the breach non-substantial and that earlier knowledge would not reasonably have changed the client’s decision. The Council’s disclosure guidance explains those conditions.

Preserve the original record, supply the missing information promptly and assess the available remedy. A replacement signature or recovery clause does not establish that a defect is cured. Before the next stage starts, confirm that the file connects the current scope and estimate to the client’s informed instructions.