Costs Assessment v Debt Recovery (NSW)

In the May issue of the Law Society Journal, Michelle Castle and Andrew Bailey discuss some of the issues legal practitioners should consider when opting to either commence proceedings against a client who doesn’t pay or whether to opt to have the fees assessed.

We set out below some food for thought for legal practitioners when faced with such a scenario.

It can be a very stressful time for legal practitioners when a client doesn’t pay for the legal services provided.  In many cases, the practitioner will have worked hard for the client and given them their best.  Inevitably, a relationship will have developed between practitioner and client.  For the client to then not pay can be difficult for a practitioner to understand and accept – not to mention bad for business.

So how can legal practitioners best recover their professional fees in a smooth, stress-free way that enables them to concentrate on other clients and to keep their costs down and business moving?

One option is to commence debt recovery proceedings against the client.  However, there are significant risks if you have not fully complied with your mandatory disclosure obligations or the client defends the proceeding making such action time consuming and potentially very costly, not to mention unpredictable.  These are set out in Andrew and Michelle’s article.

The time a legal practitioner spends recovering fees from one client is time they are not spending on work for paying clients or on business development.

A proceeding through the court for recovery of legal fees also brings with it the risk that a client may cross-claim alleging negligence in relation to work performed. Practitioners should be mindful of insurance implications of defending a cross-claim for negligence – such an action is likely to be considered a claim for payment of costs related to a dispute about fees charged to a client and excluded from the policy.

Whilst it is well established that practitioners can recover the costs of representing themselves in court – considered if the debt recovery proceedings are successful and the legal practitioner is awarded costs.  They may find themselves heading towards costs assessment anyway!

The alternative to debt recovery proceedings is an application to the Supreme Court for assessment of the costs.  Whilst the thought of having your costs assessed may be daunting, it’s worth noting that costs assessors, who are appointed to determine the costs payable, are also legal practitioners and their decisions are not published.  If you have complied with all of the disclosure obligations and have billed the client fees that are fair, reasonable and proportionate, there should be little to be concerned about with regards to having the costs assessed.

In fact, there are considerable advantages to opting for a costs assessment over a court proceeding.  Not only is the process cheaper, it is usually more predictable and less emotionally draining.

Costs assessments are usually determined on the papers, with no requirement for the legal practitioner to appear before the costs assessor or in Court.  The certificate of determination of the costs assessor can be filed and entered as a judgment of the Court.  It is also worth noting that if the practitioner has complied with their disclosure obligations and the costs are not reduced by 15% or more, then there may be little or no cost to the practitioner for the use of the assessment system.

To proceed with an assessment, a detailed itemised bill needs to be served on the client.  Such a detailed itemised bill may turn out to be higher than the amount originally billed to the client and this might be sufficient to encourage the client to compromise and settle.  If not, the bill can be filed after 30 days for assessment.

DGT Costs Lawyers can assist with all aspect of the costs assessment process – from drawing a strong, detailed itemised bill to be served on the client to managing the entire process on your behalf.

If you are not sure how we might be able to assist you recovering your hard-earned costs, please call us on (02) 9977 9200 or send us an email today.

We look forward to working with you!

Sarah McDermott  Solicitor  DGT Costs Lawyers