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  • An error in a costs agreement or bill of costs can have dire consequences, including lost fees, disputes, complaints and even disciplinary action.
  • This article addresses questions practitioners might consider when reviewing their costs agreement and bill templates.

Whether it takes the form of a simple ‘letter of engagement’, or a contract with numbered clauses, a costs agreement serves three important purposes. First, it provides the contractual framework for the client relationship. Second, it makes mandatory disclosures (in circumstances where non-compliance can constitute professional misconduct – Legal Profession Uniform Law (‘LPUL‘), ss 178(1)(d), 298(a)). Third, it is prima facie evidence that our costs are reasonable (LPUL s 172(4)).

Despite its importance, the firm’s standard costs agreement can be relegated to a ‘set and forget’ generic document, which is only looked at after problems arise. The Costs Committee discusses problems that arise when a substandard costs agreement has been used. This article endeavours to assist practitioners to review their own templates to identify areas for improvement.

Costs agreement checklist

Q: Does the agreement clearly identify the client – that is, which entity you are acting for/advising/representing?

This can be important where advice is being provided to a director. Are you advising the director (personally), or are you advising the company about its best interests? Are you acting for one client whose fees are being paid by an ‘Associated Third Party Payer’ needing a separate costs agreement?

Q: If the client is a company, is your retainer properly authorised and has the company delegated (to the contact person you are dealing with) necessary powers?

Where a client is a company, it is necessary to be satisfied that the company has engaged you and agreed to your terms. This may be able to be assumed if the costs agreement is executed in accordance with s 127 of the Corporations Act 2001 (Cth) (‘the Act‘) (s 129(5)) (a prudent solicitor will obtain a company search). Failing that, it may be necessary to obtain evidence of corporate authority to minimise the risk of acting without authority (see Cranes ‘R’ Us Pty Ltd v Busselton Mini Crane Hire Pty Ltd [2012] WADC 24 at [163] and Montevento Holdings Pty Ltd v Scaffidi Holdings Pty Ltd [2010] WASC 132 at [5]). A costs agreement can also provide for the company to appoint a specific individual to give instructions and receive updates on the company’s behalf generally (see s 198D).

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