Costs Estimates & Contract Law – When Silence Costs You
Case Summary: JSL v Leanne Cain & Associates (Legal Practice) [2025] VCAT 597
The recent decision of JSL v Leanne Cain & Associates (Legal Practice) [2025] VCAT 597 provides some recent guidance on the interaction between Legal Profession Uniform Law, Schedule1 to the Legal Profession Uniform Law Application Act 2014 (Vic) (LPUL) and other legislation regulating consumer contracts.
Facts
On 21 December 2021, JSL and Leane Cain & Associates (the Law Practice) entered a costs agreement for JSL’s family law matter (Costs Agreement). The Costs Agreement included a disclosure statement which estimated JSL’s total legal costs as $11,000 plus GST (Costs Estimate) and included an express term that: “You have a right to be notified of any significant change to the basis on which legal costs will be calculated or any significant change to the estimate of total legal costs.”
Between 28 February and 26 September 2022, the Law Practice issued five invoices, all paid by JSL. By the third invoice (25 May 2022), JSL’s legal costs nearly reached the Costs Estimate, yet the Law Practice did not provide updated costs disclosure. JSL repeatedly requested updated costs disclosure, which was never given, and ultimately ceased instructions around August 2022.
JSL then filed a VCAT application under ss 182 and 184 of the Australian Consumer Law and Fair Trading Act 2012 (Vic) (ACLFTA), seeking compensation in the amount of the legal fees she paid to the Law Practice ($14,494.20) or the amount paid in excess of the Costs Estimate ($3,494.20). JSL also argued that the Costs Agreement was void because the Law Practice did not comply with LPUL s 174.
Did the Law Practice comply with its costs disclosure obligations under LPUL s 174?
Member Cohen held that the Law Practice’s initial costs disclosure complied with LPUL s 174(1)(a). However, the Law Practice contravened s 174(1)(b) by failing to provide updated costs disclosure in May 2022. Member Cohen reasoned that it was evident there would be a significant change to the costs estimate previously provided because JSL’s legal costs were approaching the Law Practice’s costs estimate, yet discovery was ongoing and significant further work would be required to reach a settlement. Nevertheless, the Law Practice did not communicate with JSL regarding the effect this would have on JSL’s legal costs or provide updated disclosure. Consequently, JSL had insufficient information to make an informed decision about the future conduct of her matter: JSL [37]-[38].
Did the Law Practice also breach the terms of the costs agreement?
Member Cohen found that the Law Practice’s costs agreement included terms that updated costs disclosure would be provided if there was a significant change to anything previously disclosed or the Law Practice exceeded the Costs Estimate. The Law Practice breached these terms by not providing an updated costs estimate in May 2022: JSL [39]-[42].
Was JSL entitled to relief under LPUL and/or the ACLTFA?
Member Cohen found that JSL was entitled to a repayment of $469.04 under LPUL, but not to compensation under ACLTFA.
Under LPUL, the consequence of the Law Practice’s breach of the obligation to give updated (as opposed to initial) disclosure under s 174(1)(b) was that the costs agreement was void under s 178(1)(a) in futuro from 25 May 2022. Nevertheless, the Law Practice was still entitled to recover fair and reasonable legal costs for work undertaken thereafter. The repayment of $469.04 reflected deductions of $187.00 for work after JSL ceased instructions, and a 10% discount for the Law Practice’s failure to give updated disclosure ($282.04): JSL [49]-[54].
No further compensation was awarded under the ACLTFA because JSL had not established she had suffered any loss for breach of contract “above that already established for non-conformance with the Costs Disclosure Obligations”. No further compensation was required to return JSL to the position she would have been in but for the Law Practice’s breach, because the evidence did not establish that JSL would have immediately ceased instructions and incurred no further legal costs if she received updated costs disclosure: JSL [56]-[57].
Analysis
Where a costs agreement is “void” under LPUL, this does not extinguish the parties’ rights and obligations under the contract. Rather, LPUL defers a law practice’s right to recover (and the client’s obligation to pay) legal costs until they are assessed. It does not terminate the retainer, and the other terms of the costs agreement remain operative. See: LPUL ss 178(1)(a)-(c). See also: Bingham v Bevan (2023) 111 NSWLR 287, [40]-[46].
This creates some tension when clients seek relief under LPUL and other legislation regulating consumer contracts. In JSL this tension is apparent in Member Cohen’s decision that JSL was entitled to be repaid $469.04 under LPUL but not entitled to any compensation under the ACLTFA. The earlier decision of Reavill Farm Pty Ltd v Burrell Solicitors Pty Ltd [2017] NSWCA 156 addressed this tension more fulsomely in the context of the former Legal Profession Act 2004 (NSW) (LPA) and Trade Practices Act 1974 (Cth) (TPA).
In Reavill Farm the New South Wales Court of Appeal (NSWCA) confirmed that:
Burrel Solicitor’s contravention of costs disclosure obligations under the LPA also constituted misleading and deceptive conduct under the TPA; however,
The Client had not suffered any loss or damage due to the conduct.
The NSWCA then provided some guidance in obiter on what would be required to establish loss or damage, and how loss or damage would be quantified:
First, there would need to be evidence to support a finding as to the costs disclosure or estimate of total legal costs that the law practice should have given at the time of the costs disclosure failure: Reavill Farm [159]-[161].
Second, there would need to be evidence to support a finding as to what the former client would have done if the law practice had given proper costs disclosure at the relevant time or times. That is, direct or indirect evidence that the client would not have brought the proceedings or would have taken steps to avoid or contain specific legal costs if proper costs disclosure had been given: Reavill Farm [162]-165].
Third, if the client gives sworn evidence of what they would have done years after the event, the weight of this evidence must be assessed in light of the contemporaneous documents, and the circumstances the client is giving evidence with the benefit of hindsight and has an interest in the outcome of the litigation: Reavill Farm [168].
Fourth, if the former client demonstrates that some or all of their legal costs would not have been incurred but for the law practice’s conduct, that would prima facie be the measure of loss or damage flowing from the conduct. The law practice would then bear the onus of demonstrating that the client derived a collateral benefit by reason of the work performed: Reavill Farm [194].
The difficulty with this analysis is that it does not fully account for the effects of costs assessment. If VCAT or the Costs Court has already determined fair and reasonable legal costs, awarding other relief may go beyond returning the former client to the position they would have been in but for the breach because:
The client has already received the legal services;
VCAT or the Costs Court must consider whether the costs of those services were proportionate and reasonably incurred, and proportionate and reasonable in amount in determining fair and reasonable costs. This process itself results in the costs of work that is useless, unnecessary or excessive for achieving the client’s objectives being disallowed; and,
Unlike the LPA, LPUL does contemplate that a law practice may be required to repay amounts received in the client in excess for fair and reasonable costs. See, for example: ACN 627 087 030 Pty Ltd (t/as Yates Beaggi Lawyers) v Poche [2023] NSWDC 551, [29].
Key Takeaways
Failure to update a cost estimate when it’s likely to be exceeded can render the agreement void in futuro; but the law practice may still recover fair and reasonable costs for work thereafter.
Contraventions of costs disclosure obligations may also constitute misleading or deceptive conduct.
If a costs agreement includes express terms requiring updated disclosure, failure to comply may also constitute breach of contract.
LPUL contemplates the repayment of excessive legal costs following cost assessment, which may displace the need for other relief, especially where services have already been delivered.