AI in time records and legal bills
How do we charge for work while we use AI?
Most litigation firms still charge by the hour, in six-minute units. If this is the method of charging, law firms should charge clients based on how much time was actually taken, not the time it used to take before AI was used. This is of course on the assumption that AI has reduced the time taken, which in many cases it has not.
What the regulators say about AI and legal costs
The joint statement from the Law Society of New South Wales, the Victorian Legal Services Board and Commissioner and the Legal Practice Board of Western Australia says legal costs must be fair, reasonable and proportionate, and that a firm should record when and how it used AI in a matter and be able to show how that is reflected in costs if the client asks. The Queensland Law Society’s Guidance Statement No 37 says the same for Queensland: costs for work involving AI must be fair and reasonable, disclosed where the Legal Profession Act 2007 (Qld) requires it, and charged in line with the retainer.
The short version is that under time billing, the savings belong to the client. You can charge for the human time spent checking and correcting what the tool produced. You cannot charge for the time the task would have taken without it, unless your costs agreement permits you to do so.
Say how you use AI in your costs agreement
Regardless of the specific costs disclosure obligations that apply, all law firms must state how they use AI in their costs agreements, and billing should reflect that practice. Otherwise, law firms would likely fall foul of the costs disclosure rules, or could even face claims of misleading and deceptive conduct if they bill for time that has not been spent on the matter.
Alternatives to time billing
Time billing is not the only option, and AI makes the case for alternatives stronger. We have seen some law firms already move in this direction. They use any or all of the following:
• Fixed fees for defined tasks, such as preparing a financial summary or a parenting plan
• Staged fees that set a price for each phase of a matter
• Capped fees that give clients certainty about the maximum cost
These models share efficiency gains with the client. They also remove the awkward question of how many minutes a tool really saved. Clients know what they will pay, and firms are rewarded for working efficiently instead of working slowly.
Warning clients about overuse of AI
On the flip side, we often see the efficiencies gained from spending less time preparing documents lost to clients’ own use of AI, and the AI slop that comes with it.
We have all by now likely experienced clients who adopt the mantra of “why use 10 words when ChatGPT can use 100?”. This is another factor to bear in mind. We would suggest making it clear to clients that overreach in their own use of AI, as opposed to simply answering questions in their own words, can be counterproductive and in fact increase costs. There is no harm in including a warning like this in your costs agreement, highlighting that it could mean the estimate increases.
The courts’ AI rules now differ too
New South Wales restricts generative AI in affidavits and expert reports under Practice Note SC Gen 23, now under review. Victoria’s May 2026 practice note, SC Gen 25, distinguishes public from closed AI tools and extends to witnesses. Queensland’s Practice Direction 5 of 2025 is narrower but strict on references. The Law Society of New South Wales keeps a list of every court’s AI protocol.
Equally, there have been a myriad of cases where a solicitor has used AI which has then generated “hallucinations”. The sanctions for this include personal costs orders and serious disciplinary proceedings.
What to do now
None of the above is a suggestion to stop using AI if you have found efficiency from it. It means your costs agreement, your time records and your legal bills need to say what you did and who did it, before someone else asks. If a bill is already in dispute, speak to a costs expert before you lodge anything. Rose Legal acts for firms in costs assessments and taxations from our Sydney and Melbourne offices, and drafts the bills of costs that go in.
Joe Rose and Jennie Pakula cover all of this in Safer Fees & Bills: AI, Costs Agreements and Recovering What You Are Owed, a free CPD series with Clarence. It opens with an online introduction on 4 February 2027, followed by in-person workshops in Sydney, Brisbane and Melbourne later in February, each tailored to the costs rules in that state and followed by drinks and networking. Up to 3 CPD points, including Ethics. Attend one or all. Register here.
About Rose Legal
Rose Legal is a specialist legal costs law firm with offices in Sydney and Melbourne, working across Australia. We are regularly instructed in high value costs disputes in every Australian jurisdiction and can often act at short notice. 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. Joe Rose has over 16 years of legal costs experience, has been instructed in a number of high profile costs disputes and is widely regarded as one of the leading costs experts in Australia.
How Rose Legal can help your practice
We offer complimentary preliminary advice on any legal costs question, costs agreement, Costs Court taxation or file management issue. No charge and no obligation.
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