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 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 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. Each bill and each request for payment sets off its own twelve month period. Practices that bill periodically over a long matter can find that the earliest invoices are already out of time while the matter is still running, creating potential issues for legal fees recovery.
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 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. In NSW that determination is made by the Manager, Costs Assessment, who must still decide 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 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 fees, be proactive and ensure these invoices do not get forgotten about.
• Review your aged debtors now. Anything approaching twelve months should be dealt with 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 costs assessment is generally the swifter and more cost effective option for legal costs recovery. Court 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 costs disclosure obligations, the client is not required to pay the costs until they have been assessed or determined, and the practice cannot commence or maintain recovery proceedings until that happens. In those circumstances assessment becomes the only route available.
These timeframes apply to solicitor and client costs assessments. Ordered costs assessments are dealt with separately.
If you have invoices approaching or beyond twelve months, now is the time to look at them.
About Rose Legal
Rose Legal is a specialist costs law firm with offices in Sydney and Melbourne, trusted by law firms, barristers and clients across Australia for expert advice in legal costs, costs assessments, costs disputes, expert witness and legal costs recovery.
How Rose Legal Can Help Your Practice
We offer complimentary preliminary advice on any legal costs question, costs agreement 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 costs experts by telephone or email. Sydney (02) 8089 3167. Melbourne (03) 9070 9851 and/or visit rose-lawyers.com.au.
