Applying for a Costs Assessment Out of Time: Why the Twelve-Month Deadline Still Matters After Dive Lawyers
Since Dive Lawyers Pty Ltd v The Manager, Costs Assessment [2024] NSWSC 721, we have heard it said that the twelve month deadline for a law practice to apply for a costs assessment in NSW no longer really bites. The decision is narrower than that. A practice that misses the deadline can still apply, but it then has to persuade the Manager, Costs Assessment to deal with the application. Our advice is the same as it has always been. Apply within twelve months.
The deadline
Under section 198(3) of the Legal Profession Uniform Law (NSW), an application for legal costs assessment in NSW must be made within twelve months after the bill was given to, or the request for payment was made to, the client, third party payer or other law practice. If there was neither a bill nor a request, the twelve months runs from when the costs were paid.
Section 198 covers four applicants. The client of the law practice, a third party payer liable for the practice’s bill, the law practice owed the legal costs, and another law practice that has been given a bill, such as an instructing solicitor billed by counsel. The twelve months binds all four.
In our experience the point most often missed is where the clock starts.
The twelve months runs from the final bill in the matter. It does not run separately from each invoice.
An interim bill is a bill covering part only of the legal services you were retained to provide in that matter. Your monthly or stage invoices on a running file are usually interim bills, even if you have never labelled them that way. Section 193(2) of the Uniform Law allows legal costs that are the subject of an interim bill to be assessed either at the time of that bill or at the time of the final bill, whether or not the interim bill has already been assessed or paid. So, a practice that bills periodically through a long matter keeps its earlier invoices assessable until the final bill is given.
The twelve months attaches to the matter, and that cuts both ways. It helps you where a single retainer is billed in stages, because every invoice in that matter waits for the final bill.
If you act for the same client in several matters, each matter has its own final bill and its own twelve months. A matter that ended eighteen months ago can already be out of time while you are still acting and still billing that client on other files. And where you take instructions on discrete pieces of work under separate retainers, each bill is the final bill for its own matter. The final bill is the bill for the last of the services you were retained to provide in that matter.
Why practices believed they were shut out
Section 198(4) allows an application made out of time to be dealt with by the costs assessor if the designated tribunal determines, having regard to the delay and the reasons for it, that it is just and fair to do so.
On its face, that subsection names only the costs assessor, the client or the third party payer as those who may seek that determination. Neither category of law practice appears in the list. On that reading the Manager, Costs Assessment declined to entertain an out of time application from a law practice, and that understanding was widely shared across the profession.
What Dive Lawyers actually decided
The plaintiff in Dive was itself a law practice chasing its own unpaid legal fees. The Supreme Court held that a law practice may file an out of time costs assessment application. What shifted was the Manager’s administrative position and the profession’s understanding of it.
What still has to be established
Filing is only the first step. The Manager, Costs Assessment must still determine whether it is just and fair for the application to be dealt with after the twelve month period, having regard to the delay and the reasons for it. The deadline itself stands, and a late costs assessment application remains the exception.
That is a discretion, and it turns on the facts of the individual matter. If you cannot explain the delay, expect it to be a hard one to win.
What this means in practice
- If you have unpaid legal fees, be proactive and ensure these invoices do not get forgotten about.
- Review your aged debtors now, matter by matter. Where the final bill in a matter is approaching twelve months, deal with it before that date passes. Once it does, you are asking the Manager to exercise a discretion in your favour.
- If you are already out of time, there is still a route open to you, but you will need to explain the delay. Build that explanation from the file while the file is still fresh.
Assessment or recovery proceedings?
We are regularly asked which is the better route for unpaid fees. A legal costs assessment in NSW is generally the swifter and more cost effective option. Legal costs recovery proceedings can raise additional issues later, including the risk of a counterclaim against the firm.
There is also a disclosure trap worth knowing. Where a practice has contravened its legal costs disclosure obligations, the client is not required to pay the costs until the legal costs have been assessed or determined, and the practice cannot commence or maintain recovery proceedings until that happens. In those circumstances legal costs assessment becomes the only route available.
These timeframes apply to solicitor and client costs assessments in NSW. Ordered costs assessments are dealt with separately.
If you have matters where the final bill was given close to or more than twelve months ago, now is the time to look at them as part of your legal costs recovery strategy.
About Rose Legal
Rose Legal is a specialist legal costs law firm with offices in Sydney and Melbourne, working across Australia. Our costs lawyers and legal costs consultants advise law firms, barristers and clients on legal costs, costs assessments, solicitor and client costs disputes, expert witness services and legal costs recovery.
How Rose Legal Can Help Your Practice
We offer complimentary preliminary advice on any legal costs question, costs agreement, costs assessment or file management issue. No charge and no obligation.
We also provide tailored in-house legal costs CPD seminars designed for law firms. Interested in a complimentary CPD tailored to your team? We will come to you. Contact us to find out more.
Get in touch with one of our legal costs consultants and costs assessment experts by telephone or email. Sydney (02) 8089 3167. Melbourne (03) 9070 9851 and/or visit rose-lawyers.com.au.
