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The Importance of Estimates

As part of a solicitor's obligation to make Disclosure to a client in accordance with the Legal Profession Act 2007 there is a requirement to provide an estimate of the likely total legal costs for a client's matter (Section 308 (1)(c) Legal Profession Act 2007 (Qld)).

It is recommended that the estimate be included in the Disclosure Notice and not in the Costs Agreement. If the estimate is included in the Costs Agreement and the estimate is inadequate or significantly inaccurate then this may form the basis of a claim by the client that the Costs Agreement should be set aside for misleading and deceptive conduct.

The estimate can be a precise figure (e.g. $20,000) or can be in the form of a range (e.g. between $18,000 and $25,000). If the estimate is a "range" then the solicitor must also set out the major variables which may affect the calculation of the likely total legal costs. It is recommended that the solicitor provide a range rather than a precise figure for the estimate unless the solicitor can be certain that the work to be performed will remain within the scope of work included in the Costs Agreement.

The solicitor has an ongoing obligation to make Disclosure and keep the client informed of changes to the matters disclosed within a reasonable time of becoming aware of the changes to the matters disclosed (Section 315 Legal Profession Act 2007).

The solicitor should keep the client regularly informed of the legal fees being incurred by the client and compare this to the estimate provided to the client. By rendering interim bills to the client on a regular (usually monthly) basis the solicitor can monitor the total legal costs being incurred against the estimate provided to the client. Files which are higher velocity in nature should be billed more regularly to ensure the estimate is not exceeded. In some instances, it may be prudent to render bills on a weekly basis to ensure the firm and the client are both kept fully informed of the level of legal costs being incurred. Any adjustments to the estimate, together with the reasons for the changes to the estimate, must be made promptly to the client, in writing.

A solicitor should not be reluctant to provide a proper estimate to a client. There can sometimes be a fear to estimate a higher figure as the client may determine that the solicitor is "too expensive". The reality is that the solicitor is doing a disservice to the client by providing an inadequate estimate and also creating a potential complaint situation at the completion of the matter when the solicitor renders their bill.

Alternatively, the solicitor limits their fees to the inadequate estimate provided having completed work which should have been charged at a significantly higher amount - not a good business practice.

 

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