Cost and fees

1. Contribution by clients towards costs of providing legal service

A legally assisted person may be asked to pay a contribution towards the costs of providing them with legal services under a grant of legal aid.

See Contributions chapter for the policies and guidelines on contributions.

2. Fees paid to private legal practitioners under s39 of the Act

Legal Aid NSW must determine the fees to be paid to private legal practitioners to whom work is assigned by Legal Aid NSW: s39(1) of the Act.

See the Legal Aid NSW Fee Scales for fees paid to private legal practitioners.

See Delegation Instrument at clause 22 for Legal Aid NSW officers authorised to approve payment of legal practitioner's fees.

3. Right to have private legal practitioner's costs assessed

3.1 - Right of Legal Aid NSW to have private legal practitioner's costs assessed

Under s 40, of the Act, Legal Aid NSW can request a private legal practitioner to whom work has been assigned to have the bill of costs assessed or taxed as if Legal Aid NSW and not the legally assisted person was the client of the legal practitioner.

3.2 - Right of legally assisted person to have private legal practitioner's costs assessed

Under s 40(1)(A) of the Act, a legally assisted person who is required to pay a contribution under s 46  of the Act has a right to apply to the Supreme Court to have the costs of the private legal practitioner assessed or taxed.

Where legal aid has been provided by an in-house legal practitioner, the legally assisted person does not have a right to apply to the Supreme Court to have Legal Aid NSW costs assessed.

See Contributions chapter for policies and guidelines on contributions under s46 of the Act.

4. Private practitioners prohibited from charging legal aid client

4.1 - Section 41 of the Act

Section 41 of the Act prohibits a private legal practitioner from charging or recovering any costs from a legally assisted person for work that has been assigned by Legal Aid NSW to the practitioner on behalf of the legally assisted person.

Any agreement to exclude, modify or restrict the operation of s 41 of the Act is void.

Some examples of the effect of s 41 of the Act are:

• a legal practitioner cannot receive costs from anyone on behalf of the legally assisted person without prior approval of Legal Aid NSW;
• a legal practitioner cannot charge for travel or accommodation costs without approval of Legal Aid NSW;
• at the conclusion of a stage in a staged model grant of aid a legal practitioner cannot charge for a subsequent stage unless Legal Aid NSW has informed the legally assisted person that the grant of aid has been terminated.

Section 41 of the Act does not cover any legal fees earned and/or disbursements incurred by the private legal practitioner prior to the date their client received the grant of legal aid.

4.2 - Legal Aid NSW can determine that s41 does not apply to grant of aid

Legal Aid NSW may determine that s 41 of the Act will not apply when authorising a lump sum grant under s 30(2) and (4) of the Act.

See Types of Grants of Aid chapter for policy on lump sum grants.

See the Legal Aid Commission Act chapter for commentary on s 41 of the Act.

5. Costs orders

Section 42 of the Act requires a court or tribunal to make an order for costs for or against a legally assisted person as if that person was not a legally assisted person.

6. An order for legally aided client to pay costs to Legal Aid NSW

A court or tribunal may order a person who is or was a legally assisted person to pay to Legal Aid NSW the costs and expenses of providing them with the legal service.

6.1 - When can an order be made?

Under s 43(1)(a) & (b) of the Act a court or tribunal may make the order for a legally assisted person to pay Legal Aid NSW the cost of expenses of providing them with legal aid if the court or tribunal is satisfied that legal aid was obtained:

• by fraud or misrepresentation, or
• the legally assisted person has acted improperly in
  • bringing,
  • defending, or
  • conducting

any proceedings for which the person received a grant of legal aid.

6.2 - What costs and expenses are included?

Under s 43(1) of the Act costs and expenses include:

• the fees of the legally assisted person's legal practitioner,
• party/party costs, and
• expenses under s 33 of the Act.

6.3 - Which court or tribunal can make the order?

Under s 43(2) of the Act Legal Aid NSW can make an application to the court or tribunal that is hearing, or has heard:

• any proceedings with which the legal aid is concerned, or
• any other court of competent jurisdiction.

6.4 - Who can approve an application to the court/tribunal?

Legal Aid NSW officers authorised under the Delegation Instrument can decide whether an application to a court or tribunal is to be made under s 43 of the Act.

7. Deferring payment of costs to private legal practitioners

Under s 43A(1) of the Act, Legal Aid NSW may postpone paying fees and disbursements to private legal practitioners until:

• party/party costs are recovered, or
• an official investigation into the conduct of the private practitioner is concluded: s 43A(1)(b).

7.1 - Deferring costs until party/party costs recovered

Legal Aid NSW may postpone paying fees and disbursements to a private legal practitioner for a matter where legal aid was granted until Legal Aid NSW is satisfied that the practitioner has taken all reasonable steps to recover any party/party costs to which the legally assisted person is entitled.

7.2 - Deferring costs until the conclusion of an official investigation

Under s 43A(1)(b) of the Act, Legal Aid NSW may postpone paying fees and disbursements to a private legal practitioner for a matter where legal aid was granted, until the conclusion of any official investigation into the conduct of a legal practitioner about allegations of:

• breach of the Legal Aid Commission Act or the Legal Aid Commission Regulation by the legal practitioner,
• fraud or misrepresentation by the legal practitioner about the provision of legal aid or any such fraud or misrepresentation to which the practitioner is a party, or
• improper action by the legal practitioner in bringing, defending or conducting any proceedings for which legal aid has been granted or any such action to which the legal practitioner is a party.

7.3 - What is an official investigation?

Under s 43A(1A) of the Act, an official investigation includes:

• an investigation conducted by or under the authority of Legal Aid NSW where Legal Aid NSW has given written notice to the legal practitioner that the investigation is to be or is being conducted under s 43A(1)(b) of the Act, or
• criminal or disciplinary proceedings commenced against the practitioner in relation to any of the allegations set out in Costs policy 7.2 above.

7.4 - When is a legal practitioner party to fraud or improper action?

A private legal practitioner may be a party to a:

• fraud,
• misrepresentation, or
• improper action

if the practitioner:

• becomes aware of any fraud, misrepresentation or improper action, and
• fails to notify Legal Aid NSW promptly of that fact.

The fraud or improper action must relate to a grant of legal aid and include an allegation set out in Costs policy 7.2 above.

7.5 - Payment of which costs can be deferred?

A private legal practitioner may be a party to a:

• fraud,
• misrepresentation, or
• improper action

if the practitioner:

• becomes aware of any fraud, misrepresentation or improper action, and
• fails to notify Legal Aid NSW promptly of that fact.

The fraud or improper action must relate to a grant of legal aid and include an allegation set out in Costs policy 6.4.7.2 above.

7.6 - Who may defer the payment of fees?

A private legal practitioner may be a party to a:

• fraud,
• misrepresentation, or
• improper action

if the practitioner:

• becomes aware of any fraud, misrepresentation or improper action, and
• fails to notify Legal Aid NSW promptly of that fact.

The fraud or improper action must relate to a grant of legal aid and include an allegation set out in Costs policy 7.2 above

8. When can Legal Aid NSW refuse to pay a legal practitioner's fees

Under s 43A(2) of the Act Legal Aid NSW may refuse to pay any fees to a private legal practitioner for proceedings where legal aid has been granted, if:

• any allegation referred to in s 43(1)(b) of the Act against the practitioner is substantiated in any criminal or disciplinary proceedings.

This power is in addition to any other power Legal Aid NSW has to refuse to pay fees of a private legal practitioner.

8.1 - What fees are included?

Under s 43A(1)  the Act, the power of Legal Aid NSW to refuse to pay fees to a private legal practitioner relates only to fees in the legally aided matter which is the subject of the investigation (or criminal or disciplinary proceedings).

It does not relate to other work that the practitioner may have been assigned by Legal Aid NSW.

8.2 - Who can determine not to pay a legal practitioner fees?

Legal Aid NSW officers authorised under the Delegation Instrument clause 22 can determine to decline to pay the legal practitioners fees under s 43A(2) of the Act.

8.3 - Court may order private practitioner to repay costs to Legal Aid NSW

Under s43B(1)  of the Act a court or tribunal may order a private legal practitioner to repay to Legal Aid NSW the whole, or part, of any money paid by Legal Aid NSW to the practitioner.

8.4 - When can an order be made?

An order under s 43B(1)  of the Act can be made against a private legal practitioner when an allegation under s 43A(1)(b)(i) or (ii) is substantiated in any criminal or disciplinary proceedings relating to those allegations.

8.5 - What money can be ordered to be repaid?

Under s 43B(2)  of the Act the court can order that any money paid by Legal Aid NSW to the legal practitioner in a matter:

• for which legal aid has been granted, and
• to which the allegation relates

is to be repaid to Legal Aid NSW.

8.6 - Which court/tribunal can make the order?

Under s 43(2) of the Act Legal Aid NSW can make an application to the court or tribunal that:

• is hearing, or
• has heard

any proceedings in relation to the matter which is the subject of the application, or

• any other court of competent jurisdiction.

An application can only be made to a court or tribunal that has the power to award costs.

8.7 -When can Legal Aid NSW make an application?

Under s 43(2) of the Act the application can be made either:

• during, or
• after the conclusion of

the legally aided proceedings.

8.8 - Who can approve an application to the court/tribunal?

Legal Aid NSW officers authorised under the Delegation Instrument clause 22 can make an application under s 43B(2) of the Act.

9. When a client may be directed to pay costs recovered to Legal Aid NSW

9.1 - Directing legally assisted person to pay party/party costs recovered to Legal Aid NSW

In cases where legal aid has been granted, Legal Aid NSW can, by giving written notice under s 44(1) of the Act, direct

• a legally assisted person, or
• their private legal practitioner

to pay to Legal Aid NSW the whole or a specified part of any money recovered by or on behalf of the legally assisted person in the matter for which a grant of legal aid was made.

9.2 - Legal Aid NSW must account to legally assisted person for money received

Under s 44(3) of the Act, once Legal Aid NSW receives money it has directed the client to pay under s 44(1) of the Act, it is required to account for that money to the:

• legally assisted person, or
• their private legal practitioner.

9.3 - What can be deducted from the money received by Legal Aid NSW?

Under s 44(4) of the Act, when Legal Aid NSW receives money it has directed the client or their legal practitioner to pay Legal Aid NSW, it may:

• deduct any amount owed to it by the legally assisted person, and
• offset the amount of any fees payable by it to any private legal practitioner in connection with the matter in which the money was recovered, against any other money held by the legal practitioner for the same matter.

9.4 - Legal Aid NSW can take proceedings to recover money not paid under s44 of the Act

Under s 44(5) of the Act, Legal Aid NSW may take proceedings to recover money not paid as directed under s44 of the Act, and any interest, as a debt in a court of competent jurisdiction.

Note: Where a s 44 direction is appropriate, a matter is not to be referred to the Debt Recovery Unit until after the authorised officer has given the s 44 direction to pay the money to Legal Aid NSW.

10. Assignment of costs under s45 of the Act

Under s 45 of the Act, Legal Aid NSW may request a legally assisted person to assign their right to recover money which is payable to the legally assisted person.

10.1 - What money can be recovered?

Legal Aid NSW may direct the legally assisted person to assign to Legal Aid NSW the right to recover money which:

• a court or tribunal has ordered to be paid to a legally assisted person (including an order for costs), or
• is otherwise recoverable by a legally assisted person whether or not in a proceeding, or by a settlement or compromise.

10.2 - When can Legal Aid NSW direct a person to assign recovery rights?

Under s 45(1) of the Act if a legally assisted person fails to recover the money within such time as Legal Aid NSW thinks reasonable, Legal Aid NSW may direct them to assign their recovery rights.

10.3 - Direction to assign by a Notice

Legal Aid NSW may direct, by written notice, a legally assisted person to assign their right to recover the money or such part of the money as specified in the Notice.

A legally assisted person is to assign their recovery right in the Notice of Assignment within 21 days after the date of the Notice.

10.4 - Failure to comply with a Notice

Under s45(2) of the Act a legally assisted person is deemed to have assigned their right to recover the money specified in the Notice of Assignment if they fail to comply with the notice within 21 days after the date of the Notice.

10.5 - Who can direct a client to assign?

A Legal Aid NSW officer authorised under the Delegation Instrument clause 22 can direct a client to assign their right to recover money.

10.6 - Legal Aid NSW must account to legally assisted person

Legal Aid NSW must account to the legally assisted person for money recovered by it under s 45 of the Act.

11. Costs Legal Aid NSW must pay on behalf of the client under s47 of the Act

Legal Aid NSW must pay costs awarded against a legally assisted person up to the monetary limit established by the Legal Aid NSW Board, unless the matter comes within the exceptions set out in Costs policy 11.7 below.

Discretion to pay costs in certain types of matters

In certain matters Legal Aid NSW has discretion as to whether it will pay costs ordered against the legally assisted person.

See Delegation Instrument clause 25 for who has authority to exercise the discretion to pay costs under s 47(4) and (4A) of the Act.

11.1 - Statutory protection for legally assisted person from paying certain costs

Under s47(1)(b) of the Act, a legally assisted person is given statutory protection against paying costs awarded against them except in:

• specified types of state matters.

The statutory protection in s47(1)(b) of the Act does not apply in federal court matters. However, see Act chapter for Legal Aid NSW policy on paying costs in Federal Court and tribunal matters.

11.2 - Notification of statutory protection to other parties in proceedings

Because of the statutory protection and the Legal Aid NSW monetary limit, s34(6) of the Act requires that a legally assisted person's legal practitioner advises any other parties to the proceedings of the effect of s47 of the Act.

Section 34(6) Notice must be sent to all other parties involved in the proceedings which advises them of the effect of s47 of the Act.

See Costs guideline 6.2 for direction on notifying other parties to proceedings of the effect of the statutory protection against an adverse cost order (s47 indemnity).

11.3 - Contribution by legally assisted person towards s47 costs

Under s36(1)(b) of the Act a legally assisted person may be required to pay a contribution towards the costs which Legal Aid NSW pays under s47 of the Act. This is a condition of the grant of legal aid and the amount must be set out in the grant letter to the legally assisted person.

See Contributions chapter for details on the contribution policy and payment procedures.

11.4 - Legal Aid NSW liability is limited to a maximum amount under s47

Under s 47(2) of the Act, the liability of Legal Aid NSW in the event an adverse cost order is made against a legally assisted person, is limited to a maximum amount. The current maximum amount is $15,000.

The ceiling of $5,000 referred to in s 47(2) of the Act may be raised by Legal Aid NSW Board without amending the Act.

11.5 - Uniform application of the limit

Legal Aid NSW does not raise the ceiling for particular matters. It will only raise the ceiling as a matter of policy to apply to all matters which come within the scope of s 47.

11.6 - How Legal Aid NSW distributes costs under s47 to parties

Legal Aid NSW does not raise the ceiling for particular matters. It will only raise the ceiling as a matter of policy to apply to all matters which come within the scope of s47.

11.7 - When Legal Aid NSW may decline to pay costs awarded against a legally assisted person

Under s 47(4) or (4A) of the Act Legal Aid NSW may decline to pay costs awarded against the legally assisted person in the following types of matters:

• an appeal, or application for a new trial, made on the ground that money awarded to the legally assisted person is inadequate s 47(4)(a);
• an action in which the legally assisted person is successful against one or more, but not all, of the other parties to the action: s 47(4)(b) of the Act;
• an action in which the legally assisted person is successful after having been unsuccessful in interlocutory proceedings related to the action: s 47(4)(b1) of the Act;
• when an order for costs is made against a legally assisted person in an interlocutory matter, where possible payment of those costs are to await the outcome of the proceedings. If the legally assisted person succeeds in the proceedings, Legal Aid NSW may decline to pay the interlocutory costs under s 47(4)(b1) of the Act. Note that this subsection does not apply to order for costs made before 1 February 1997.
• an action heard and determined under s 42 of the Civil Procedure Act 2005 (NSW): s47(4)(c);
• an action brought under the Family Law Act 1975 (Cth), and
• matters under Child Support (Assessment) Act 1989 (Cth).

Legal Aid NSW should give the legally assisted person the opportunity to respond to a Notice which informs the legally assisted person that Legal Aid NSW intends to decline to pay costs under s 47 of the Act.

If Legal Aid NSW decides to decline to pay costs under s47 of the Act then Legal Aid NSW must:

• record the reasons for the decision (s 47(7)),
• within 14 days notify the legally assisted person in writing of the decision (s 47(5)), and
• inform the legally assited person that they have a right to appeal to the Legal Aid Review Committee against the decision (s 47(6)).

11.8 - When Legal Aid NSW is not liable to pay certain costs

Under s 47(4) or (4A) of the Act Legal Aid NSW may decline to pay costs awarded against the legally assisted person in the following types of matters:

• an appeal, or application for a new trial, made on the ground that money awarded to the legally assisted person is inadequate s 47(4)(a);
• an action in which the legally assisted person is successful against one or more, but not all, of the other parties to the action: s 47(4)(b) of the Act;
• an action in which the legally assisted person is successful after having been unsuccessful in interlocutory proceedings related to the action: s 47(4)(b1) of the Act;
• when an order for costs is made against a legally assisted person in an interlocutory matter, where possible payment of those costs are to await the outcome of the proceedings. If the legally assisted person succeeds in the proceedings, Legal Aid NSW may decline to pay the interlocutory costs under s 47(4)(b1) of the Act. 
• an action heard and determined under s 42 of the Civil Procedure Act 2005 (NSW): s47(4)(c);
• an action brought under the Family Law Act 1975 (Cth), and
• matters under Child Support (Assessment) Act 1989 (Cth).

Legal Aid NSW should give the legally assisted person the opportunity to respond to a Notice which informs the legally assisted person that Legal Aid NSW intends to decline to pay costs under s 47 of the Act.

If Legal Aid NSW decides to decline to pay costs under s 47 of the Act then Legal Aid NSW must:

• record the reasons for the decision (s47(7)),
• within 14 days notify the legally assisted person in writing of the decision (s 47(5)), and
• inform the legally assited person that they have a right to appeal to the Legal Aid Review Committee against the decision (s 47(6)).

11.9 - Liability of legally assisted person under s 47 when aid is terminated

If legal aid is terminated and an adverse costs order made after termination, the formerly legally assisted person is liable for the whole of the opponent's costs of the proceedings and this includes party/party costs incurred even when the grant of legal aid was current.

Legal Aid NSW officers must be aware of the effect that terminating legal aid may have in rendering formerly legally assisted persons liable for the whole of their opponent's costs of the proceedings. This includes party/party costs incurred for the period even when legal aid was current.

In appropriate cases, opportunities are to be given to a legally assisted person to conclude proceedings without incurring adverse costs orders. This is particularly relevant in in-house matters where Legal Aid NSW is also the legally assisted person's legal practitioner.

11.10 - Who can authorise a s47 payment

If legal aid is terminated and an adverse costs order made after termination, the formerly legally assisted person is liable for the whole of the opponent's costs of the proceedings and this includes party/party costs incurred even when the grant of legal aid was current.

Legal Aid NSW officers must be aware of the effect that terminating legal aid may have in rendering formerly legally assisted persons liable for the whole of their opponent's costs of the proceedings. This includes party/party costs incurred for the period even when legal aid was current.

In appropriate cases, opportunities are to be given to a legally assisted person to conclude proceedings without incurring adverse costs orders. This is particularly relevant in in-house matters where Legal Aid NSW is also the legally assisted person's legal practitioner.

6.4.11.11 -Is there protection under s47 of the Act for legally assisted persons in Federal court and tribunal matters?

The application of s 47 of the Act to proceedings in the Federal Court was considered by the Full Court of the Federal Court in Woodlands and Ors v. Permanent Trustee Company Ltd and Ors (1996) 139 ALR127.

The Court held that:

“Section 47(1)(b) does not apply to the Federal Court in that it is inconsistent with s 43(1) of the Federal Court of Australia Act 1976 (Cth) which sets out the Court's power to award costs”.

Whether or not s 47 will apply in other federal courts and tribunals depends on whether legislation establishing those courts and tribunal includes a power to award costs that is inconsistent with s 47 of the Act.

Legal Aid NSW should advise the legally assisted person in the grant letter that there is no statutory protection in federal court matters.

See Cost guideline 1 for procedure on notifying legally assisted person about federal court and tribunal matter.

11.12 - Legal Aid NSW may decide to pay certain costs in federal court matters

Legal Aid NSW policy is that it may pay an amount towards costs awarded against a legally assisted person up to the monetary limit set under s 47(2) of the Act.

The legally assisted person will be liable to pay any balance owing.

11.13 -The Court may make an order for security of costs against legally assisted person

Section 47(1)(b) of the Act does not prevent the court making an order against a legally assisted person for security to pay costs. However, it can provide a reason why an order for security for costs should not be made.

The New South Wales Court of Appeal in Rajski & Anor v Computer Manufacturer & Design Pty Ltd [1983] 2 NSWLR 122 decided that s 47(1)(b) of the Act:

"cannot operate to destroy the jurisdiction or power of the Supreme Court to order security for costs . It certainly will in the ordinary run of cases make an order for security for costs a wrong exercise of the power to do so."

This decision was followed in Petranker v Brown [1983] 2 NSWLR 131.