In our experience, most people are very anxious about engaging attorneys because of a lack of understanding legal costs and, many attorneys have been criticised for not being upfront about costs. The last thing you want is to engage an attorney and end up with a large, unaffordable and unexpected legal bill.
In this article, I hope to explain some of the concepts around legal costs and provide a basic guide on the topic so that you can focus on the solution to the legal issue instead of the dread of the bill to come.
At the outset you should be asked to sign a written mandate and fee agreement which will clearly set out the costs you can expect to be billed for in the matter. The fee agreement should cover aspects like the attorney’s hourly rate, the fact that deposits may be required, that certain disbursements will be incurred on your behalf and it should advise you generally about how you will be billed. It is important to understand your fee agreement with your attorney and to ask him/her any questions about legal costs upfront.
You should also request a cost estimate for any particular matter you engage an attorney for and in litigious matters, you should ask your attorney to revise the cost estimates from time to time. You should also ask your attorney to provide you with regular interim accounts so that the costs do not build up without you realising it.
Your attorney will typically charge you a fee at an hourly rate or he/she may charge an agreed fee for a certain aspect of the work to be done or his/her fee will be based on a tariff. The hourly rate or extent of the agreed fee, will depend on many factors such as the complexity of the matter, the urgency of the matter, the level of expertise required to attend to it, the level of experience of the attorney, the importance of the matter to you and of course, the amount of time required to attend to it. A good attorney will always provide pricing options, aspects and a guide to understanding legal costs.
In conveyancing matters, your conveyancer will base his/her fee on the recommended tariff. The tariff fee for transferring property is based on the value of the property. The conveyancer will also charge you for certain disbursements such as the Deeds Office Fee, Deeds Search costs, postage and petties and the like. Ask your attorney for a pro forma account before you conclude the transaction so that you can budget accordingly.
In deceased estate matters, the executor is entitled to charge a fee of 3.5% of the value of the estate for attending to the administration thereof. In addition, the estate will have to bear the costs of advertising for debtors and creditors and for advertising the estate accounts, the Master of the High Court’s fee and for any valuations of assets.
In litigious or commercial matters, you can expect to be charged for the time which the attorney dedicates to your matter – whether it be time spent in consultation, in court, drafting, on the phone or dealing with correspondence.
In this case, the attorney will also charge you for items like postage and petties, printing/copying, opening a file, FICA compliance and for other admin/office related costs.
The attorney will pass on costs of messenger services, sheriff’s and other people who assist in the processing of legal documents. The attorney may require a deposit before engaging 3rd parties or they will simply account to you for the invoices they receive from the providers.
In certain matters you may require an expert to give evidence in your matter and these experts will charge you for consultations, preparing reports, attending inspections in loco and for giving evidence at court. The experts will charge at their professional rates and these costs will be passed on to you.
You may be advised to brief an advocate for an opinion in a matter, to draft papers or to appear in court on your behalf. Advocates typically specialise in certain areas of law and are experts in presenting cases at court. Much like attorneys, advocates may charge an hourly rate or a fixed rate for a particular attendance.
In commercial matters it is vital that you assess the potential costs of litigating and weigh the costs of litigation against the quantum of your claim. It is worthwhile asking your attorney to prepare a costs/risk analysis for you so that you can properly consider your options that lead to understanding legal costs before you commence litigation.
In non-commercial matters, where for example you are dealing with family law issues, you cannot put a price on the orders you will be seeking but you should still obtain an estimate of the costs so that you can ensure that you can afford to finalise the proceedings.
There are many factors which will influence the costs of pursuing litigation, including but not limited to:
It is possible to reach agreement with your attorney that he/she will not charge you for attendances as they are incurred but will rather take some risk and only charge you if the litigation is successful, in which case, he/she will charge a percentage of the value of your claim.
These arrangements must be contained in a written contingency fee agreement and are not appropriate in family law and criminal matters.
Party and Party costs
these are costs based on the court tariff and are typically limited to attendances which are absolutely necessary in order to take the matter further. This is the scale of costs which a successful party would ordinarily be entitled to recover from an unsuccessful party in litigation.
Attorney and client costs
Understanding legal costs incurred in litigious matters based on the court tariff but will include more attendances than would be allowed on a party and party scale. When a successful party is awarded costs and the unsuccessful party is punished by the court for litigating in bad faith or for any other reason which the court may want to voice its displeasure, the court will order the unsuccessful party to pay the successful parties’ costs at this punitive rate.
Attorney and own client costs
this refers to the specific fee agreement reached between the attorney and his/her client and will encompass all of the costs raised by the attorney at the agreed rate. These costs may be at a higher rate than the prescribed tariff and will not necessarily be recoverable from the other party in litigation.
A successful party to a dispute may be entitled to have the other party pay for their legal costs incurred in the litigation. This obligation may arise from a contractual obligation and/or may be included in a court order or arbitration award.
Once a party is awarded costs, they will have to have their costs assessed in a process called taxation. This is where a third party (usually the taxing master of the court) assesses the quantum of the costs incurred by the successful party based on the tariff and the scale of costs awarded.
Litigation can often take months or even years to resolve and the courts have a discretion when asked to award costs – so you will have to fund the litigation along the way and you shouldn’t bank on recovering your costs.
Another important factor is that you will hardly ever recover all of the costs you incur from an unsuccessful party in litigation due to the difference between party and party, attorney and client and attorney and own client costs. In other words, your attorney may charge you more than you will be able to recover from an unsuccessful party.
You should not be in the dark about understanding legal costs involved in any legal process. Ask your attorney for a pro forma account or cost estimate before you engage him/her and for regular interim accounts along the way.
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