Understanding capped costs

Lawyers are now promising to cap your contribution to costs at 10% or 15% of the settlement sum. This means that if you receive $300,000 they take up to $30,000 to $45,000 in legal costs.

This arrangement is very dangerous. Be very careful for the following reasons:

  1. Insurers pay legal costs so understand the total costs being paid to your lawyer
  2. Understand the work being done and whether the costs are fair
  3. Lawyers should be providing a costs estimate that will include the costs coming from the Insurer. Has the Lawyer given this information?
  4. Understand the stage at which the case settles. Most cases settle before court proceedings. The costs should not be significant if it settles before court proceedings start.

Under this arrangement the Lawyer may charge the same amount to you whether it settles at a first conference or at a court hearing. Taking 10 to 15% by way of costs when it settles at the first conference is in our opinion excessive.

Most TAC Common Law cases settle without any court proceedings. TAC pay substantial costs when a case settles. In some instances we accept just the GST on costs paid by TAC. It would be rare for costs to exceed 4% of the settlement in any TAC case we do.

Some recent examples

Recent examples of our cases and the legal costs charged:

  1. Settlement of $278,000. Client paid $8700 including GST. This is 3.1% of the settlement.
  2. Settlement of $210,000. Client paid $3020 including GST. This is 1.5% of the settlement.

In both instances the Insurer paid more than $30,000 towards the legal costs.

In Worksafe claims it is more complex because Worksafe only pay a fixed amount of $13,500 towards the legal costs when the case settles before court proceedings.. You will pay more costs from your own pocket. What is fair depends on a number of factors.

As to what is fair understand your case. With TAC and Worksafe cases there are four parts to the case:

  1. Is there a Serious Injury
  2. Is negligence an issue
  3. The assessment of pain and suffering
  4. The assessment of loss of income

In some TAC cases the claim is only for pain and suffering, negligence is accepted and serious injury is clear. This is the most straightforward case. We think TAC pays a fair sum for costs. You should only pay GST which would be approximately $2000.

All cases are not the same and the costs should reflect the issues in the case. Taking a flat percentage across all cases is wrong.