FIXED FEE COSTING GUIDE

Transcription

1 Your Law Firm Central Office ABN Techno Park Drive WILLIAMSTOWN VIC 3016 T: (03) F: (03) FIXED FEE COSTING GUIDE Updated:

2 TABLE OF CONTENTS 1. Overview Suggested Method Fee Disclosure and Cost Agreements Example Schedule 1 to Fee Disclosure and Legal Cost Agreement VCAT Proceedings Example Schedule 2 to Fee Disclosure and Legal Cost Agreement VCAT Proceedings.. 11

3 Overview A first class court system and a first class legal profession are of no avail to a person who cannot afford to access them. Sir Anthony Mason, Former Chief Justice of the High Court of Australia Time costing is an industry practice which has long been criticised as a time-consuming, fee-inflating thorn in the side of good client-lawyer relationships. Too often, lawyers are subjected to the strain of Legal Services Commissioner (LSC) investigations as a result of complaints from dissatisfied clients who have received inordinately large bills based on hourly fees. An alternative method of charging which has gained a lot of traction in recent years is fixed fee costing, which has a high level of client acceptance due to its transparent nature and the price certainty that it affords. Benefits of Fixed Fee Costing On a broad, industry-wide scale, fixed fee costing has the benefit of transcending actual and perceived limitations to access to justice. For most clients, legal costs are an unexpected expense which is not anticipated or budgeted for (e.g. marriage breakdown, unfair dismissal). Where a matter starts off small but becomes more complex, legal costs can also begin to spiral out of control. As a result, when members of the public encounter legal issues, they often find themselves in a position where they are representing themselves, or forced to give up on enforcing their rights. Just as often, the mere assumption that they won t be able to afford a solicitor deters the public from seeking assistance at all. Fixed fee costing effectively addresses both the actual hurdle of massive legal costs, and the perceived hurdle that only the rich can afford to engage a lawyer, by making legal practitioners more affordable and accessible, and by giving clients the price certainty that they need. For law firms, fixed fee costing provides a platform for developing positive client-lawyer relationships through the removal of potential cost tensions, and also provides the firm with a point of differentiation from the industry norm. It also promotes the firm as an affordable option by focusing the client s attention on the value that they are receiving, rather than on uncontrollable hourly fees. The transparency of fixed fee costs allows clients to know what they re getting into from the get-go, and also makes it easier for lawyers to recover their professional fees particularly where they are not operating a trust account and asking for fees in advance as clients have the ability to anticipate when and how big a bill will be received. Firm efficiency is also significantly improved as inefficient time-recording and billing habits are forgone, the stress of billable hours and monthly budgets alleviated, and practitioners become free to focus on the work at hand.

4 Key Pitfalls & Risk Factors to Overcome The biggest pitfalls that practitioners encounter in fixed fee costing are: Insufficient skill in estimating the scope and the time needed to completed work or a matter; Failure to precisely define the scope of the retainer to identify specific inclusions and exclusions; and Failure to adequately estimate and disclose potential other costs of the matter (including estimation of disbursements). This guide seeks to address some of the key risk factors of fixed fee costing, and to provide you with examples and tools to ensure that you meet all of your disclosure requirements. Suggested Method Your Law Firm suggest the following method for costing matters on a fixed fee basis: Setting your rates Cost matters according to either the Practitioner Remuneration Order, the relevant Scale or based on your hourly rate. Your Law Firm generally suggests an hourly rate of $ per hour for most practitioners. Cost in stages We strongly recommend using a staged costing method to provide greater detail and accuracy to your quotations. Not only will this provide clients with a clear idea of what they can expect from you, it is also a clear definition of the scope of your retainer in the event that a variation needs to be negotiated. Scope of Retainer When defining the scope of your retainer, always provide as much detail as possible by outlining the scope of your retainer in a manner which particularises which services are included in your quote, and which services will attract additional cost. Where unexpected circumstances arise, the detail with which you have defined your retainer will often be determinative of whether you will be entitled to negotiate variations to your quote, and charge the client more for the unforeseen issues. Disbursements

5 Fixed fee quotes should specify that disbursements and GST are excluded and payable in addition to professional fees unless otherwise expressly included. This will provide some protection to the practitioner in the event of unexpected circumstances and disbursements. Litigious Matters For all litigious matters, practitioners should quote with consideration of the Scale of Costs appropriate to the jurisdiction in which the matter is being litigated, hourly rate and any additional allowance to take into account the specific needs of each client. A staged costing approach is also beneficial in these matters as they define clear billing intervals and allows practitioners more control in the event of unexpected circumstances arising (e.g. the need for additional interlocutory applications). Service / Profit Mark-up/Value-add When deciding on a percentage service or profit mark-up, try to anticipate insofar as possible the level of service which the client is expecting, and the time that will be required to provide same. Your Law Firm suggests a Gold / Silver / Platinum mark-up approach whereby Platinum Service clients will be charged a higher percentage mark-up than their Gold Service counterparts. Value Adding When defining the scope of your retainer and giving a fixed fee quote, practitioners are encouraged to promote other related services to add value for their clients, and to generate more files for their business. Another aspect of value adding is also the consideration of what your service is worth to your client. For example, if your advice or hard negotiation as well as your skill and knowledge of a particular subject matter has led to a great cost saving for the client than that can be taken into account when fixing the price. In this instance, actual time spent or any other method of costing becomes irrelevant. Think of an instance where the client comes to you and tells you that unless you do something, as a matter of extreme urgency, they are facing a potential action which may cost them $500,000. Say you work on an advice overnight which might take you 4-5 hours and say you come up with the solution how to get them out of trouble. How much would you charge them? Wouldn t it be justified to charge them $10,000 or $20,000? You just saved them $500,000. Does it really matter that you only spent 4-5 hours on it? It matters though that you have the relevant expertise and that you have many years of experience in that particular area. And finally, can the client pay you what you propose to charge?

6 Fee Disclosure and Cost Agreements At the commencement of a matter which involves fees in excess of $750 (excluding GST), your client must be provided with a Fee Disclosure Statement and Costs Agreement which details their rights and obligations under the agreement, and their ability to seek review of the costs. This Agreement must contain a fixed fee quote for the matter. Please see Annexure A for a template Fee Disclosure and Costs Agreement. This template has been carefully formulated by Your Law Firm s Cost Consultant to ensure that you meet your disclosure obligations under the Legal Profession Uniform Law (Vic), and must be used by Your Law Firm practitioners to produce Fee Disclosure Statements and Legal Cost Agreements for clients. An editable version of this template is available through the Lawyers Portal of the Your Law Firm website and in your Electronic Induction Pack to be provided to you in your Induction Training. The Fee Disclosure Statement and Legal Costs Agreement template may be updated from time to time, and while you will be notified by Your Law Firm Central Office of any change, it remains your responsibility to ensure that you are using the most up-to-date document.

7 ANNEXURE A

8 Costing Example Magistrates Court of Victoria Stage 1 (Pleadings) Stage 2 (Defence & Counterclaim; Further & Better Particulars) Stage 3 (Discovery & Production) Stage 4 (Interrogatories) Stage 5 (Applications (2x) if required) Stage 6 (Mediation) Practitioner s Fees $2,100 Complaint - $1,200 Certificates - $450 Mark-up (+25%) $1,200 Perusal of defence; Request for particulars; Perusal of further particulars; Provision of further and better particulars; Copies, filing, service; Mark-up (+25%) $2,000 Notice of discovery; Notice to produce; Affidavit of Documents and production of documents; Perusal of affidavit of documents and inspection of documents; Attendances on counsel as required Mark-up (+25%) $1,800 Preparation of interrogatories; Copies, filing, service; Perusal of answers; Attendances on counsel; Answers to interrogatories; Instructions, copies, swearing, service; Attendances on counsel Mark-up (+25%) $1,200 Preparation and filing or applications Mark-up (+25%) $2,400 Brief to Barrister Attendance to instruct (4 hours) Mark-up (+25%) Disbursements $850 Filing Fee - $661 Service - $67 + GST (10%) $1,800 Review of discovered documents; 2 hour conference with client $1,700 Review of interrogatories; 2 hour conference with client $6,700 Barrister s preparation; Barrister s appearance; Service fee $4,700 Barrister s preparation; Barrister s appearance (first 4 hours); Stage 7 (Pre-Hearing) $8,000 Organisation of witnesses, including attendances, subpoena (if required); $8,500 Barrister s preparation (2.5 days);

9 Arranging expert witnesses, including obtaining and perusing expert reports, and statement of expert witness (including filing and service); General preparation up to hearing; Mark-up (+25%) Stage 8 (Hearing) **Excludes Experts fees** N/A $15, Hearing Fee; Barrister s attendance (first 6 hours); Barrister s attendance (2.25 days thereafter); Recordings; Witness Expenses **Excludes Experts fees** Other General Travel time ($150/hr); Photocopying - $350.00; Mediator Fee - $1,320.00;

10 Example Schedule 1 to Fee Disclosure and Legal Cost Agreement VCAT Proceedings Stage of Work Scope of Work Our Fixed Fee VCAT PROCEEDINGS AGAINST XYZ PTY LTD STAGE 1 (Pleadings) Brief to Barrister including copies of all relevant documents and correspondence; Engrossing Points of Claim; All reasonable communications with you, the other party or their lawyer, the Tribunal and Counsel, including phone calls, meetings, letters, s and faxes, necessary to carry out of the above steps. $ STAGE 2 (Defence / Counterclaim) STAGE 3 (Discovery) Perusal of Points of Defence Affidavit of Documents Production of documents for examination by the other side Review of correspondence and documents from the other side Arranging Conference with Counsel (if necessary); All reasonable communications with you, the other party or their lawyer, the Tribunal and Counsel, including phone calls, meetings, letters, s and faxes, necessary to carry out of the above steps up to the scheduled Compulsory Conference date. $1, STAGE 4 (Mediation) Summary of Position; All reasonable communications with you, the other party or their lawyer, the Tribunal and Counsel, including phone calls, meetings, letters, s and faxes, necessary to carry out of the above steps. $ STAGE 5 (Pre-hearing) Brief to Experts (x2) including copies of all relevant documents and correspondence; Obtainment and Perusal of Experts Reports; Pre-hearing attendances on Experts; Conference with Counsel; General preparation up to hearing; All reasonable communications with you, the other party or their lawyer, the Tribunal and Counsel, including phone calls, meetings, letters, s and faxes, necessary to carry out of the above steps. Excludes Expert s Costs (may be significant) $15, STAGE 6 (Hearing) Tribunal Books Chronologies Outlines of Witness Evidence Organisation of Experts attendances Excludes Expert s Costs (may be significant) Excludes Summons. Instructing Barrister at Hearing $14, TOTAL FIXED FEE $31, GST 10% $3, TOTAL FEE INCL GST $35,145.00

11 Example Schedule 2 to Fee Disclosure and Legal Cost Agreement VCAT Proceedings Description Disbursements that may be incurred VCAT PROCEEDINGS AGAINST XYZ PTY LTD Other Disbursements Stage 1 Balance on VCAT Application Fee for Claim over $100, $ Barrister s Fees Stage 1 $3, Barrister s Fees Stage 2-3 $1, Barrister s Fees Stage 4 $3, Barrister s Fees Stage 5 $15, Barrister s Fees Stage 6 $13, Other Disbursements Stage 6 Chronologies Transcript Costs Tribunal Books $5, Experts Fees Stage 5 $10, Court Fees $1, Photocopying, Travel & Parking $2, TOTAL ESTIMATE OF DISBURSEMENTS $55,257.00