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 is important to provide an accurate, transparent and predictable estimate. Clients expect certainty. If estimates are too high, they may deter a client. If they are too low, issues can arise later, including dissatisfaction, delays in payment and potential disciplinary action.
Unfortunately, the initial estimate may not always be fully accurate. Legal matters can be complex, and unforeseen issues may arise during a case. However, legal professionals must provide estimates they reasonably believe are accurate at the time.
The benefits to lawyers of providing accurate cost 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 for Providing More Accurate Cost Estimates
Lawyers must meet statutory requirements for cost disclosure. However, accurate estimates also reduce disputes and client dissatisfaction.
Methodology for Estimating Legal Costs
A clear estimating process improves accuracy for each client. It also increases confidence in charging appropriately.
Gather Information
During the initial consultation, collect as much relevant information as possible. This helps you understand the issues properly. It also allows you to break the matter into stages and improve clarity. Accurate information is essential for reliable estimates.
Verify with historical data
Use past case data to assess the time and work required for similar tasks. Identify who will perform the work. This helps allocate resources and estimate time more accurately.
Identify risk factors
When reviewing a matter, identify any risk factors. These may include self-represented litigants, foreign jurisdictions, multiple parties, or complex legal or liability issues.
Updating the Estimate
Regularly review each matter to ensure the estimate remains accurate. Update it when necessary. Practice management systems with time recording can assist. In litigation, key events such as mediation, joinder of parties, or pre-hearing preparation provide good opportunities to review 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.
Cost Estimates from Blue Ribbon Legal
Get help from the legal costing experts at Blue Ribbon Legal in Sydney if you require a costs estimate for a client.