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Blackstone Brief – Volume 2

Can you withdraw and substitute a Bill of Costs?

Our guide to when – and how – it can be done

 

Withdrawing and substituting a Bill of Costs isn’t something you’d usually lightly. But there are times you have the right to do it and there are also times you can, and probably should, use that right. Dipal Prasad, an Associate Solicitor in our Sydney office, takes a look at what can and can’t be done.

The general rule

Generally, a solicitor can’t withdraw a Bill of Costs they’ve already issued to a client and substitute it for an increased amount – unless, of course, the court orders it or the client consents to the new fees.

Bowen CJ summarised this rule in Florence Investments Pty Limited v H G Slater & Co (1975) 2 NSWLR 398 at 401:

“If a bill of costs is sent to the client without any condition being stated, then the solicitor cannot, in the case of a taxable bill, afterwards withdraw it and send in an amended bill.”

The exceptions

Like most rules, however, there are exceptions. These include:

  1. When the contract between the solicitor and client allows it (Re Thompson (1885) 30 Ch D 441 (Re Thompson);Gorczynski v Beilby (2005) NSWSC 884), or when the solicitor makes a reservation in a lump sum bill that says if their client asks for an itemised bill, they can withdraw the existing bill and substitute a larger one (Florence Investments; Gorczynski v AWM Dickinson & Son (2005) NSWSC 277; Legal Profession Uniform General Rules 2015 (NSW) r 74.).
  2. Where there are clear errors or real omissions amounting to “special circumstances” (Re Thompson; Bowen & Ors v Campbell unreported Master Malpass 2 December 1997).

Where the bill is not in assessable form, in which case the solicitor can withdraw that bill and replace it with one that is (Florence Investments).
Let’s look at each of those exceptions in more detail.

Exception 1 – What does the contract say? 

A contract between a solicitor and client can stipulate that a Bill of Costs can be substituted – although it will only be enforceable if it’s fair.

In fact, in NSW and Victoria, a solicitor’s right to include a reservation of rights clause in a lump sum bill is now protected under rule 74 of the new Legal Profession Uniform General Rules 2015 (NSW).

Exception 2 – Are there special circumstances?

Generally, special circumstances can arise when there has been a clear error or real omission. Alternatively, they can happen when a legal practice has exercises reasonable care but something happens that’s beyond their control.

Back in 1881, Jessel MR in Re Holroyde & Smith (1881) 43 LT 722 set out what he considered to be “special circumstances”:

“…when the solicitor has been entrapped into making charges by the misrepresentations of his client or in the case of accident, where a charge or a page had been inserted [or omitted] by mistake; but special circumstances there must be.”

On this note, one costs assessor recently found that a law firm’s failure to set up a system to capture all time spent on a client’s file was specifically not a special circumstance.

Exception 3 – Is the bill in assessable form?

Once upon a time, bills were taxed before the Register and they’re still often described as ‘taxable’. These days, however, they’re assessed by Court-appointed costs assessors, so the rule and exceptions to it are now applied to “assessable” bills.

Kirby J in Gorczynski v Beilby (2005) NSWSC 884 held that costs assessors retained authority to determine whether a Bill of Costs was in assessable form, as well as whether a solicitor was entitled to withdraw one bill and reissue another in assessable form.

That said, there is no easy way to determine whether a bill is in assessable form, as the term is not defined in legislation in NSW and Victoria. Even so, this exception is probably less relevant today than ever. Recent case law shows that any bill, whether itemised or lump sum, will be considered assessable so long as it contains enough details to allow costs to be assessed.

However, generally the process for applying for an assessment is:

  • The client or solicitor applies for the whole or part of legal costs to be assessed, usually by annexing a Bill of Costs to an Application for Assessment of Costs (Section 198 of the Uniform Law).
  • The bill may be either lump sum or itemised (Section 186 of the Uniform Law). A lump sum bill is “a bill that describes the legal services to which it relates and specifies the total amount of the legal costs” (Regulation 5 of the General Rules). An itemised bill is “a bill that specifies in detail how the legal costs are made up in a way so as to allow costs to be assessed” (Regulation 5 of the General Rules).
  • In NSW the rules used to prescribe the contents of an itemised bill, including the dates and amounts for each attendance and whether attendances were by letter, telephone, perusal, drafting, conference, etc (Now repealed regulation 111B of the Legal Profession Regulation 2005 (NSW)). However, this is no longer the case.

The rule to always remember is that the more detailed a Bill of Costs is, the easier it is for the costs assessor to determine:

  • whether the costs were reasonably incurred
  • whether they were carried out in a reasonable manner, and
  • whether they were fair and reasonable.

That means including sufficient detail is almost always the best approach for maximising your chances of recovering costs.

Want more?

Get in touch with us for advice on your retainer or on your lump sum bill template to see whether you have reserved your right to substitute a Bill of Costs. We can also let you know where you stand on any invoices you’ve issued.