- Section 172 of the Legal Profession Uniform Law (NSW) imposes a new test for determining the fair and reasonable costs that a legal practitioner may charge a client.
- The test is whether the costs are proportionate in amount and proportionately and reasonably incurred.
- Practitioners must familiarise themselves with the new test if they wish to both adequately carry out their obligation of costs disclosure in s 174 and understand how costs will be determined.
- Even costs that are not proportionate to the result obtained may still be fair and reasonable.
From 1 July 2015, any costs falling to be assessed under the Legal Profession Uniform Law (NSW) 2014 (the LPUL) (which are to be known as “Uniform Law Costs” – those costs where the lawyer was retained after 1 July 2015) or under the Legal Profession Uniform Law Application Act 2014 (which are to be known as “ordered costs” – those costs ordered to be paid in proceedings commenced after 1 July 2015) will be assessed in accordance with the principles set out in s 172 (1) of the LPUL.
A new test?
The test in s 172 is:
(1) ‘A law practice must, in charging legal costs, charge costs that are no more than fair and reasonable in all the circumstances and that in particular are:
- proportionately and reasonably incurred; and
- proportionate and reasonable in amount.
For the moment, we do not need to consider the other matters to be considered in determining the reasonableness of costs in s 172 (2).
It is immediately obvious that the test to be applied is expressed in different language from the test in ss 363 and 364 of the Legal Profession Act 2004 (the Act). The general principles of statutory interpretation would suggest that this requires a different interpretation.