You hired a lawyer, received an estimate of what your matter was likely to cost and budgeted accordingly. Then the final legal bill arrived, and it was thousands, or even tens of thousands, of dollars more than you expected.
How does that happen?
Legal cost estimates are not always fixed prices. Legal matters can change, unexpected issues can arise and considerably more work may be required than initially anticipated. However, that does not mean your final legal bill should come as a complete surprise.
If your legal costs have significantly exceeded the original estimate, it is important to understand why the increase occurred, what your lawyer told you along the way and whether your costs were properly disclosed.
One of the first things to understand is the difference between an estimate and a fixed fee.
An estimate is generally an indication of what your lawyer expects the matter to cost based on the information available at the time. A fixed fee, on the other hand, usually involves an agreed amount for a particular service or defined scope of work.
Legal matters can be unpredictable. A dispute that initially appears straightforward may become significantly more complicated once another party becomes involved, court proceedings commence or new evidence emerges.
For this reason, the amount you ultimately pay can sometimes be higher than the initial estimate.
The important question is not simply whether the estimate changed. It is whether the increase was reasonable and whether you were properly informed about it.
There are many legitimate reasons why a legal matter may become more expensive than originally anticipated.
A matter may take longer to resolve, require additional court appearances, involve considerably more correspondence or require advice from barristers, experts or other professionals.
The behaviour of the other party can also significantly affect legal costs. If another party refuses to negotiate, repeatedly changes their position or files unexpected applications, your lawyer may need to perform additional work that could not reasonably have been anticipated at the beginning.
In litigation, circumstances can change quickly. What started as a relatively straightforward matter can become much more complex.
An increase in costs is therefore not automatically evidence that something has gone wrong.
While estimates can change, clients should generally be kept informed about their legal costs.
Under applicable legal profession legislation, lawyers have obligations concerning the disclosure of legal costs. Depending on the circumstances and jurisdiction, this can include providing information about how costs will be calculated, an estimate of the total legal costs and updates when there is a significant change to previously disclosed information.
This is particularly important when a matter begins to cost considerably more than originally anticipated.
If your estimate was $30,000 but your legal costs eventually reached $80,000, you would reasonably want to understand when the expected cost changed, why it changed and what you were told about that increase.
A final invoice should not necessarily be the first time you discover that your legal costs have substantially exceeded the original estimate.
During a lengthy legal matter, you may receive several updated estimates.
Do not ignore them.
An updated estimate can be an important indication that the scope or complexity of your matter has changed. It also gives you an opportunity to ask questions about what is driving the additional costs and whether there are alternative ways to proceed.
However, simply receiving a new figure does not necessarily answer every question.
Consider whether the reason for the increase was adequately explained and whether you were given enough information to make an informed decision about continuing with the legal work.
Sometimes there is no single large charge responsible for a legal bill blowing out.
Instead, hundreds of smaller charges accumulate over the life of the matter.
Emails, phone calls, file reviews, conferences, correspondence with the other side and internal discussions can each add to the total cost.
Where lawyers charge according to time, even relatively short tasks can contribute significantly to the final bill when they occur repeatedly over several months or years.
This is why reviewing the detail of your legal bill can be just as important as looking at the final figure.
Your initial estimate may have been based on one lawyer primarily handling your matter.
As the matter progresses, additional solicitors, senior lawyers, barristers, paralegals or experts may become involved.
That can sometimes be necessary and appropriate, particularly in complex matters. However, it can also increase the overall cost substantially.
If several professionals are working on your matter, it is worth understanding who is doing what and how their involvement affects your legal costs.
You may also want to look at whether there appears to be unnecessary duplication of work, such as several lawyers attending the same meeting or repeatedly reviewing the same material.
This is where concerns can arise.
If your legal costs substantially exceeded the estimate you were originally given and you received little or no warning, it may be worth taking a closer look at what occurred.
Your lawyer's costs agreement, initial disclosure, subsequent updates and correspondence about fees can all be relevant.
For example, if you were originally told a matter was likely to cost $25,000 and eventually received bills totalling $75,000, you would want to understand whether the additional costs were reasonably incurred and whether you were appropriately informed as the estimate increased.
A failure to comply with applicable costs disclosure obligations can have consequences and may be relevant when legal costs are later reviewed or challenged.
Not necessarily.
A final bill being higher than the original estimate does not automatically mean the lawyer has overcharged you.
The matter may genuinely have required more work than expected.
However, a significant difference between the estimate and the final amount can be a reason to investigate further, particularly where the increase was unexpected or poorly explained.
The focus should be on understanding why the costs increased, whether the work performed was necessary and reasonable, and whether you were properly informed throughout the matter.
If you are concerned about the final amount, go back to the documents you received when you first engaged your lawyer.
Review the original costs agreement and any cost disclosures alongside your invoices and subsequent updates.
Look at how the lawyer said they would charge you, what estimate was provided and whether the hourly rates or other charges on your invoices are consistent with what was disclosed.
Then look at any updated estimates you received during the matter.
This can help you build a clearer picture of how your legal costs progressed from the original estimate to the final amount.
You should not be afraid to ask questions about your legal costs.
If you cannot understand why your bill increased, ask your lawyer to explain what changed and what additional work was required.
If you have received a lump sum bill with limited detail, you may also have rights regarding an itemised bill, which can provide a more detailed breakdown of the work performed.
Understanding how the total was calculated can help you determine whether the increase makes sense or whether further review may be appropriate.
If your final legal bill is significantly higher than the estimate you received, particularly where you were not kept informed about the increase, an independent legal costs review may help provide clarity.
A legal costs lawyer can examine your costs agreement, disclosures, updated estimates and invoices to determine whether there may be issues with the way your legal costs were disclosed or charged.
They can also consider whether the work performed and amounts charged appear fair and reasonable in the circumstances.
It is important to seek advice promptly because time limits can apply to certain processes for challenging legal costs.
A legal cost estimate is not always a guarantee of what your matter will ultimately cost. Matters change, complications arise and additional work can legitimately increase legal fees.
But that does not mean clients should be left in the dark.
If your legal costs are increasing substantially, you should generally be kept informed about what is happening and why. By the time your final bill arrives, a significant increase should not necessarily come as a complete surprise.
If your final legal bill is considerably higher than the original estimate and you do not understand why, review your costs agreement, disclosures and invoices carefully.
At Law in Check, we help individuals and businesses across Australia understand and challenge legal costs. If your final legal bill is significantly higher than the estimate you were originally given, we can review the circumstances and help you understand whether the costs may warrant further investigation.
Should you require any help with understanding or challenging your legal fees,
call Law in Check on 1800 529 462 or send us an email at info@lawincheck.com.au.
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