Most personal injury firms, including Polaris Lawyers, perform their work on a “no win, no fee” basis. But what does that mean for the legal costs accrued by your lawyer, in running your matter? In this article, we specifically look at how legal costs are calculated in medical negligence claims and public liability claims.
What are Legal Costs for Medical Negligence and Public Liability Claims?
Legal “costs” are usually made up of two types of charges; professional fees and disbursements.
Professional fees are the amount a firm will charge for the legal work they undertake.
Disbursements are the external charges that a firm will pay on your behalf. Disbursements in a medical negligence or public liability claim often include the costs of obtaining medical records, expert reports and fees associated with lodging court documents.
The simplest way to understand the differences between professional fees and disbursements is by using the “mechanic analogy”. The professional fees are similar to the labour costs in a mechanic’s bill whereas disbursements are similar to the costs of parts (for example, the oil, new tyres etc).
What are Solicitor/Client costs and Party/Party Costs?
When you hear your lawyer talk about “solicitor/client costs” and “party/party costs”, it can be confusing.
When I started working as a lawyer, I had no idea what these two terms referred to and why they were important. Although they sound confusing, stay with me as they are more straightforward than you think.
Solicitor/client costs are often referred to as the total “legal costs”. You can think of solicitor/client costs as the whole pie; both the professional fees your lawyer accrues for the work they perform on your matter and the disbursements they charge you at the resolution of your claim. These total legal costs are the same as solicitor/client costs.
Party/party costs are the costs that either a court will order the defendant in a claim to pay or the amount that the defendant has agreed to pay as part of the settlement terms of your claim.
Party/party costs are usually only partial reimbursement of your legal costs. Relating it back to the pie, they might cover the cost of two-thirds of the pie.
So, who pays for the other part of the pie?
Why do Party/Party Costs not cover all my costs?
One of the easiest ways to understand why party/party costs, or the costs that the defendant will pay, won’t cover all of your legal costs is to relate it to a doctor’s visit.
When you see a doctor, there is usually a gap between the amount a doctor will charge you for a service and the amount that Medicare will pay for that service. You can think of the solicitor/client costs as the doctor’s charge and the party/party costs as the amount Medicare will pay for the service.
In most cases, the gap between solicitor/client costs and party/party costs will be paid out of any compensation received for your personal injury claim.
Example of legal costs calculations in a “no win no fee” personal injury claim
To further clarify the calculation of legal costs, consider the following scenario.
- You engage a lawyer on a “no win no fee” basis for a medical negligence claim;
- The claim takes about three years to resolve;
- During the three years, your lawyer accrues fees for their work, totalling $27,000;
- The law firm also incurs disbursements for your matter (which they have covered during the three-year period of your claim), totalling $16,000;
- The solicitor/client fees are therefore $43,000 (the total of the two figures above);
- You win your matter and you are awarded $182,000 in compensation;
- The defendant has agreed, as part of the settlement offer, to cover $30,000 of your solicitor/client fees;
- This leaves $13,000 of solicitor/client fees outstanding. This amount is deducted from your compensation amount ($182,000 compensation minus $13,000 outstanding solicitor/client costs);
- You will receive $169,000.
Note, there may be other payments deducted from your settlement amount; for example, any Centrelink benefits you received while your claim was being processed.
Adverse Costs Orders: will I ever have to pay the defendant’s costs?
It is vital that you are aware that a Court may order you to pay the other party’s costs in a court proceeding if you are unsuccessful with your claim. This is called an Adverse Costs Order.
Even if you have engaged a lawyer under a “no win, no fee” arrangement, you may still be liable to pay the other side’s legal costs if you lose. The “no win, no fee” arrangement is between you and your own lawyer and covers your own lawyer’s costs only. So, it is crucial that make sure you are talk with your lawyer about potential cost implications for you at all stages of your claim.
You can learn more about what happens if you lose your case, in our previous article, “What happens if I lose a No Win No Fee case?”
Have you got a query about legal costs in your personal injury claim?
If you are about to start investigating a potential medical negligence or public liability claim, make sure that you are clear about what costs you will be liable for if you are successful and who will pay for which pieces of the pie.
At Polaris Lawyers, we are open and transparent about the way we charge. We will keep you informed at every step of your matter.