Costs assessment explained: getting a legal bill formally reviewed

A costs assessment is a formal, independent review of a legal bill, carried out by a costs assessor, a costs court or a court officer, who decides what amount is fair and reasonable. Clients can apply to have their own lawyer's bill assessed, and parties can have costs payable under a court order assessed. In most states a client's application must be made within 12 months after the bill was given, the request for payment was made, or the costs were paid. Assessment is the route for bills too large for the Legal Services Commissioner, or for disputes where the Commissioner's time limit has passed. It has its own fees and risks, so check the likely reduction before applying.

This guide is part of how to dispute a legal bill. Figures are illustrative.

Who runs costs assessment in each state

Procedures, forms and fees are set by each court and change from time to time; the court's website has the current versions.

Two kinds of assessment

1. Solicitor-client (client and own lawyer). Is the bill fair and reasonable under the costs agreement and the law? The assessor looks at the agreement, the disclosure and the work done.
2. Party-party (under a costs order). How much of the winner's costs must the loser pay on the ordinary or indemnity basis? See costs orders and who pays.

This guide focuses on the first.

What an assessor looks at

Under the Uniform Law and similar state rules, the assessor considers whether the costs are fair and reasonable, including:

• Whether the lawyer complied with disclosure obligations and the costs agreement
• Whether the work was reasonably necessary and done in a proper manner
• The skill, labour and responsibility involved and the complexity, novelty or difficulty of the matter
• The seniority of the people who did the work and whether rates were reasonable
• The time spent, including duplicated or excessive time
• Any estimate given and whether the client was told of changes
• The quality of the work, and any relevant rule or practice

If there is a valid costs agreement, the assessor generally applies it, unless a term is unfair or unjust or the agreement is void, such as where required disclosure was not given.

The time limit and late applications

The general rule is 12 months from the bill, the request for payment or payment. Some states allow a late application in limited circumstances, and sophisticated or commercial clients may have different rights. Do not assume an extension will be granted. If you are near the deadline, lodge the application and sort out details later.

Who pays the costs of the assessment

Assessment is not free. There are usually application fees and assessor's fees, and the rules decide who pays them. A common pattern is that the lawyer pays the costs of the assessment if the bill is reduced by 15% or more, and otherwise the applicant may pay. Queensland's Legal Services Commission also says that a reduction of 15% or more may lead to a referral to the Commission. Check the rule in your state.

Worked example (illustrative)

Alex receives a final bill of $46,200 including GST for a building dispute, $19,000 over the last estimate, with no update. The disputed amount is above the Commissioner's binding determination limit, so Alex applies for assessment within 12 months.

• The assessor reduces partner time charged for routine correspondence: $4,950
• Removes duplicated internal conference time: $2,640
• Finds the estimate was not updated and reduces hearing preparation time that went beyond what was reasonable: $3,300
• Total reduction: $4,950 + $2,640 + $3,300 = $10,890

Assessed amount: $46,200 - $10,890 = $35,310. The reduction is $10,890 / $46,200 = 23.6%, above a 15% threshold, so under a rule like the one above the firm would usually bear the costs of the assessment.

If the reduction had been, say, 8%, Alex might have paid the assessment costs, and the saving could have been smaller than the cost of the process.

Before you apply

• Get the itemised bill first; it is the raw material for any assessment
• Mark the items you dispute and why, with reference to your disclosure
• Calculate the likely reduction realistically; small differences rarely justify assessment
• Consider the Commissioner first if the amount is within its limits, because it can be quicker and cheaper
• Pay the undisputed part if you can, and record that payment is without admission

Frequently asked questions

Can my lawyer sue me while an assessment is pending?

Rules vary, but generally a lawyer cannot proceed to recover disputed costs while an assessment application is on foot, and recovery of costs that were not properly disclosed must wait for assessment.

Can I appeal an assessment?

Most schemes allow a review or appeal on limited grounds, such as a review panel in NSW or an appeal to a judge. Time limits are short.

Will the assessor read my whole file?

The assessor can call for the file and usually reviews the parts relevant to the disputed items. A clear list of disputed items with reasons makes the process quicker and cheaper.

Sources

• Supreme Court of NSW — costs assessment scheme in NSW
• Supreme Court of Victoria — the Costs Court
• Legal Services Commission (Queensland) — costs assessments and the 12-month limit in Queensland
• Legal Practice Board of Western Australia — costs disputes and assessment in WA
• Office of the Legal Services Commissioner (NSW) — choosing between a costs dispute and assessment