Under the Legal Profession Uniform Law, a lawyer must provide an estimate of total legal costs to a client when instructions are initially given, or when there is a significant change.
It’s important to deliver an accurate estimate to a client that is transparent and predictable, as clients expect certainty. Estimates that are too high can may deter a client, while an estimate that is too low may lead to problems later, including client dissatisfaction, delay in receiving payment and potential disciplinary action.
Unfortunately, the initial estimate may not always be completely accurate, as legal cases can be complex, and unforeseen issues can arise during a case. Nonetheless, legal professionals need to provide clients with cost estimates which they reasonably believe are accurate at any given point in time.
The benefits to lawyers of providing accurate costs estimates include:
- Organisation – Planning an estimate will help lawyers prepare a case strategy and allocate resources including workloads and time management, and avoid over-servicing.
- Transparency – Lawyers are required to disclose costs that exceed $750. Legal professionals who are candid about legal costs instil confidence, whereas those who are hesitant to disclose costs may be perceived as untrustworthy.
- Client Understanding – When a client understands the costs associated with one or more legal options, it helps them better make decisions and plan to pay (including paying quicker).
Tips from Blue Ribbon Legal on how to provide a more accurate costs estimate:
It’s important to meet the statutory requirements of providing an estimate of legal costs; however, the benefits to lawyers also include limiting the potential for costs disputes or client dissatisfaction.
Maintaining a well-defined process for estimating legal costs is important, as this will help to ensure greater accuracy for each client. It will also increase your ability and confidence to charge appropriately.
During your initial consultation with the client, ensure that you gain as much vital information as possible to understand the issues properly. This will help break down the case into stages and provide greater insight and clarity for the lawyer. Information is important for providing an accurate estimate of legal costs.
Verify with Historical Data
Use your database of previous cases to help assess the amount of work and time that is required to finish specific tasks, and who will perform the work. This allows lawyers to allocate staff resources, and calculate how much time they are likely to spend on a particular case.
Are there Risk Factors?
While reviewing a client’s case, identify any risk factors involved. Risks that may impact fees include: self-represented litigants, foreign jurisdictions, multiple parties, complex legal or liability issues.
Updating the Estimate
It is equally important to review a client matter at various stages, to ensure the initial estimate remains accurate or determine whether an updated estimate should be provided. Practice management systems using time-recording can be a useful tool for lawyers. In litigated matters, specific events such as mediation, joinder of additional parties or during pre-hearing preparation provide an opportunity to review the estimate of legal costs.
Discuss the estimate with the client
Legal professionals should sit down with or call their client to discuss the legal costs estimate and how the lump sum figure was calculated, both at the time of initial disclosure and when an updated estimate is provided.
An explanation of the legal terms used should also be provided, to ensure the client’s understanding and agreement to the costs likely to be incurred.
If any changes to the estimated legal costs occur, the client should be made aware and the reasons should be explained. Ideally, a client should never receive a legal bill with unexpected costs, as they should always be aware of changes to the estimated legal costs.