An important consideration before entering into an agreement with a lawyer to provide services to a client is the amount of fees which would be charged.
There are at least two ways in which a lawyer may charge a client:
- He may charge a client on a fixed fee basis or on a charge out rate based on the amount of time spent on the work by the lawyer.
- Another method of charging is by a Conditional Fee Agreement.
Note: This article does not consider the Conditional Fee Agreement, as special conditions must be met before such an agreement may be made with a lawyer. The lawyer would have to advise the client as to the availability of such an agreement.
Fixed Fee Agreements
In a “Fixed Fee Agreement”, the lawyer and a client should agree to a specific amount of work which the lawyer will undertake under the agreement. In order for a client to be clear about the amount of work which the lawyer would need to do, it is imperative that the lawyer explains to a client the extent of the work which is required.
While the duty to explain to a client the extent of work required would lay on the lawyer, a client should also explain to the lawyer exactly what the client requires to be done or achieved (if it may be so achieved).
After consulting the lawyer, should the client not be clear on the amount or type of work which needs to be done, then it is imperative for the client to ask the lawyer to clarify what needs to be done. Set out below are examples of the types of work which one could expect to be clearly defined:
- Sale and purchase of real estate;
- Some areas of criminal law work, such as a plea in mitigation;
- Uncontested divorce applications.
There is a caveat that in almost all legal work, unexpected positions may be taken by any counterparty or there may be an unexpected ruling of the court. Further, even for example, with what might appear to be a straightforward sale and purchase of real estate, a legal requisition may reveal a hindrance to the transfer of the title which may complicate the sale. In any of these contingencies, the amount of work to be undertaken by the lawyer may increase, in which case, in a fixed fee agreement, the lawyer may have to absorb the additional costs of the expenditure of effort, namely without obtaining extra fees. Alternatively, if the work agreed upon clearly does not cover the contingency, then the lawyer may seek the client’s consent to have that additional work charged.
In the disadvantageous situation of having agreed to a fixed fee to “move” the client from one position to another position, as one would expect, most lawyers do not agree to a fixed fee agreement unless the work to be undertaken is clearly defined.
The second approach set out above is where the lawyer agrees to charge out based on the amount of time spent on the work, usually, on a charge out rate of for example, $600.00 per hour. This method of calculating fees is simply the product of the time spent and the charge out rate of the lawyer.
If several lawyers are involved in the matter, the time charges of all the lawyers are summed up. Some firms have different charge out rates according to the experience of the lawyers who are working on the matter. In such circumstances, the firm may charge a “blended” rate which is usually an average of the charge out rates of all the lawyers retained to work in the matter.
A time-based charge is a common method applied in contentious matters. It would also be normal for the firm to provide a client with a reasonable estimate of the fees to be expended in the whole matter, although with the client’s consent, the actual fees charged may substantially exceed the estimate.
In addition to a lawyer’s professional fees, a client would have to pay the lawyer’s disbursements. Disbursements are the lawyer’s out of pocket expenses which he has incurred in the course of undertaking his work. These may include telephone charges, postage, transportation charges, printing, courier services, filing fees, paper and so on.
Very often, a matter may take more than a few months to complete. It is thus necessary, prudent, and in the client’s best interests, if the lawyer has not provided the client with an update of the costs expended, for the client to ask the lawyer for an interim bill. In that bill, a client will be able to gauge the amount of fees and disbursements thus far incurred on the matter. A lawyer would in any event be under a duty to provide a client with an interim bill every six months.
Taxation/Assessement of Costs
In the case of a bill of costs incurred in court proceedings, there is an immediate recourse to the courts by the client if there is a dispute with respect to the bill. A client has a right to have the client’s lawyer’s bill of costs “taxed” or “assessed” by the courts.
Taxation or assessment is the process whereby the court determines the reasonable amount which should be charged by a lawyer. A client would need (by instructing another solicitor if the client is a company) to apply to court for an order for the bill of costs to be taxed by the court. Alternatively, if the lawyer agrees to the taxation of the bill of costs, the court may proceed to tax the bill without any order.
So far as non-contentious work is concerned, there is also recourse to the same taxation process by the court. The amount charged must be “fair and reasonable” in all the circumstances, failing which a client may be entitled to challenge the validity of the bill of costs in court, and have it reduced to such amount as is considered to be “fair and reasonable” by the court.
Ultimately, legal fees is not strictly a matter of an agreement for a fixed amount. It is a combination of the agreement for fixed fees or a fixed charge out rate and the process of the client and the lawyer monitoring how those fees are being incurred together with a dash of prudence.
Advocate and Solicitor
© Glen Koh 2022
Notice: Nothing contained in this note shall be construed as legal advice.