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Document 5 - Page 1 of 6
 
FEDERAL COSTS ADVISORY COMMITTEE 
 
NINETEENTH REPORT ON SOLICITORS' COSTS 
 
UNDER THE HIGH COURT RULES 
 
 
 
PRELIMINARY 
 
1. 
This is the Nineteenth Report of the Federal Costs Advisory Committee on solicitors' 
costs in the High Court of Australia. 
 
2. 
The present scale is contained in the Second Schedule of the High Court Rules.  The last 
amendment to this scale took effect on 1 October 2002 following the adoption of the 
Eighteenth Report by this Committee which recommended an increase of 3.2 per cent in the 
scale of costs.  The recommendation took into account the Consumer Price Index (CPI) at 
June 2003; and the Wage Cost Index (WCI) at June 2003 published by the Australian Bureau 
of Statistics (ABS). 
 
3. 
The Committee is comprised of the following members: 
 
a)  The Hon Brian Lacy (Chairman), 
 
b)  Mr D A Crawford, 
 
c)  Mr D C D Harper, 
 
d)  Mr B McMillan, 
 
e)  Mr M Minogue, and 
 
f)  Mr W D K Teasdale. 
 
4. 
By an advertisement placed in the Australian Financial Review on 1 August 2003 and 
in The Weekend Australian of 2 August 2003, the Committee invited interested persons and 
organisations to forward written submissions to the Committee Secretary by 22 August 2003.  
The Committee did not meet in 2003.  The Committee held a public hearing on 1 September 
2004. 
 
SUBMISSIONS 
 
5. 
The Law Council of Australia (LCA) made the only substantive submission to the 
Committee.  The LCA made a submission in August 2003, and a subsequent submission on 
26 August 2004.  The LCA made an oral submission to the Committee in the hearing on 
1 September 2004.  The LCA welcomed the new chair and expressed its appreciation for the 
tremendous contribution made by the former Chairperson, the late Senior Deputy President 
Polites, in the Committee’s proceedings and work over many years. 
 

Attorney-General's Department documents released under FOI22/171
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Document 5 - Page 2 of 6
 
The LCA’s substantive submissions are summarised below: 
 
a)  Approach 
 
 
The LCA recommended the Committee maintain the current approach for the 
adjustment of fee scales. 
 
b)  Weightings 
 
 
The LCA recommended the following formula weightings: 
 
Salaries and Wages 
38% 
Other Overheads 
32% 
Partners’ Salaries and Profit Share  30% 
 
c)  Calculations 
 
The LCA: 
 
(i) 
supported the continued use of the ABS WCI for salaries and wages and 
partner’s salaries and profit share and the net income components of 
solicitors’ costs 
(ii) 
supported the continued use of the ABS WCI ‘ordinary-time hourly rates 
of pay including bonuses’ index 
(iii)  supported the continued use of the CPI as the primary index for the 
adjustment of the “Other Overheads” component 
(iv)  opposed discounting of the CPI by reference to the Constant Tax Rate 
Measure (CTRM) adjustment of the CPI. 
 
d)  Superannuation Guarantee Levy (SGL) 
 
 
The LCA sought an adjustment by reference to the 1% increase in the SGL 
effective from 1 July 2002. 
 
e)  Professional Indemnity Insurance 
 
The LCA asked that the Committee note the potential impact of increasing 
professional indemnity insurance premiums on solicitor’s overheads.  The LCA 
referred to a report commissioned by the Australian Government from the 
Australian Competition and Consumer Commission entitled ‘Public Liability and 
Professional Indemnity Insurance –  Third Monitoring Report’ (July 2004) and 
recommended an increase of 2.04% to the Other Overheads component to reflect 
the increase in professional indemnity insurance premiums. 
 
f) 
Adjustment 
 
 
The LCA recommended an increase of 10.2% in the scale of fees. 
 

 
Attorney-General's Department documents released under FOI22/171
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Document 5 - Page 3 of 6
 
TERMS OF REFERENCE 

 
6. 
The Committee noted the revised terms of reference approved by the former 
Attorney-General on 29 April 2002, noting the inclusion of the Federal Magistrates Service, 
the exclusion of ACT Courts, and the incorporation of Bankruptcy Costs into the general 
Federal Court scale. 
 
CONSIDERATION OF THE ISSUES 
 
Scope of the Committee’s Power 

 
7. 
The Terms of Reference of the Committee confine it to advising Commonwealth Courts 
on:  
 
“. . .variations in the quantum of costs for solicitors (including expenses and fees for 
witnesses) which should be fixed in the rules and regulations for which they are 
respectively responsible.” 
 
8. 
The Committee noted, as it had in the past, that any increase in scales will impact on 
consumers of legal services.  However, the terms of reference of the Committee contain the 
following provisions: 
 
a) 

that the Committee is to have regard to the reasonable expenses incurred by 
solicitors in the conduct of their practices and the need for them to recover, in 
full, increases in these expenses; and 
 
b) 

the need for solicitors’ costs to be consistent with a reasonable return on 
capital and to provide appropriate recognition of professional skills. 
 
General Approach of the Committee 
 
9. 
The Committee considered it should maintain its longstanding approach to adjustment 
of the Scales of Costs in accordance with a formula reflecting movements in salary and 
wages, other overheads and an appropriate return for principals in legal practice. 
 
Weighting of Components 

 
10.  The Committee accepted the submission by the LCA that ABS statistical information 
supports a change in the weightings allocated to components of the formula for the purposes 
of calculating recommended increases in fee scales.  The validity of changing the weightings 
was confirmed to the satisfaction of the Committee. 
 
11.  The weightings are: 
 
a)  Salaries and Wages:   
 
 
38%; 
 
b)  Other Overheads: 
 
 
 
32%; and 
 
c)  Partners’ Salaries and Profit Share: 
30%. 
 

 
Attorney-General's Department documents released under FOI22/171
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Document 5 - Page 4 of 6
 
Formula Indices 

 
Wage Cost Index 
 
12.  The Committee agreed to continue with the use of the WCI for calculation of the wages 
& salaries and profit share component of the formula.  The WCI, reflecting ordinary time 
rates of pay including bonuses, was adopted in the Sixteenth Report.  The Committee is 
satisfied that this index is conceptually satisfactory despite its potential for some volatility. 
The material put to the Committee suggests that volatility was not a problem in the period 
under review.  
 
13.  The most recent data available is the WCI for the June Quarter 2004. 
 
The CPI 
 
14.  The LCA raised the issue of the use of the CTRM following the introduction of the New 
Tax System.  The LCA noted that the Committee’s 18th Report recommended reverting to the 
use of the unadjusted CPI figure in relation to the calculation of the ‘other overheads’ 
component.  The LCA recommended the continued use of that approach.   The Committee 
agreed with the LCA recommendation. 
 
15.  The CPI for the June Quarter 2004 is the most recent data available. 
 
Superannuation Guarantee Levy (SGL) 

 
16.  The Committee accepted the submission of the LCA that an adjustment should be made 
to the Wages and Salaries component to reflect the 1% increase in the SGL, operative from 
1 July 2002.   
 
Professional Indemnity Insurance
 
 
17.  The Committee noted the material provided by the LCA concerning the likely 
continuing increase of professional indemnity insurance premiums. 
 
18.  The Committee acknowledged the LCA’s concerns.  The evidence established to the 
satisfaction of the Committee that an allowance for this item is justified.  While noting the 
difficulty in calculating with precision the value of the increase the Committee accepted the 
formula that was advanced by the LCA in its submission that an adjustment should be made 
in the Other Overheads Component to reflect the increase of approximately 0.93% of the total 
costs for legal practices.  Expressed as a proportion of the elements of all other legal practice 
costs in the Other Overheads Component the increase in professional indemnity costs is 2.04 
per cent. 
 
19. 
The Committee noted the transient nature of the rise and fall in Professional Indemnity 
Insurance and considered it as a special item in the Other Overheads Component for the 
purpose of this review.  Professional Indemnity Insurance will not be included as a permanent 
element of the Other Overheads Component, but may be revisited in the event of any future 
significant rise or fall. 
 
 

 
Attorney-General's Department documents released under FOI22/171
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Document 5 - Page 5 of 6
SUMMARY OF FINDINGS 
 
19.  The Committee: 
 
a)  affirms its general approach to adjustment of the scales, 
 
b)  is satisfied that no discount to the CPI for the second round effect of the New Tax 
System is necessary, and 
 
c)  acknowledges the LCA’s concern regarding professional indemnity insurance 
premiums. 
 
20.  These findings lead the Committee to recommend an increase of 10.2 per cent in the 
scales.  This reflects movements in the relevant published indices from March 2002 to 
June 2004 for CPI and from December 2001 to June 2004 for WCI.  Detailed calculations are 
as follows: 
 
a)  Movements in Indices (with ABS adjustment) 
 
 
At March 2002 
At June 2004 
% Increase 
 
 
 
 
 
CPI 
136.6 
144.8 
6.00 
 
 
 
 
 
 
At December 2001 
At June 2004 
% Increase 
 
 
 
 
 
WCI 
114.5 
124.3 
8.56 
 
 
b)   Solicitors' Costs 
 
 
% of Gross Costs 
Movement in 
% Increase 
Relevant Indices (%) 
Wages and Salaries 
38 
9.56 
3.63 
(2002 – 35%) 
(reflects WCI plus 
1.00% for additional 
Superannuation 
Guarantee 
adjustment) 
 
 
 
 
Other Overheads 
32 
6.00 
3.96 
(2002 – 34%) 
 
(reflects CPI plus 
2.04% for 
Professional 
ndemnity Insurance 
Premium 
Adjustment) 
 

 
Attorney-General's Department documents released under FOI22/171
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Document 5 - Page 6 of 6
 
 
 
 
Partners’ Salaries 
30 
8.56 
2.57 
and Profit Share 
(2002 – 31%) 
 
 
 
 
Sub-total 
10.16 
 
 
 
 
Recommended 
 
Increase 
10.2 
 
 
RECOMMENDATION 

 
21.  The Committee recommends an increase of 10.2 percent to the scale of solicitors' costs 
specified in the Second Schedule to the High Court Rules. 
 
 
 
 
 
 
B J Lacy 

Chairman 
 
22 September 2004 
 

 
Attorney-General's Department documents released under FOI22/171
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Document 6 - Page 1 of 6
FEDERAL COSTS ADVISORY COMMITTEE 
 
NINETEENTH REPORT ON SOLICITORS' COSTS 
 
UNDER THE FAMILY LAW ACT 1975 
 
 
PRELIMINARY 
 
1. 
This is the Nineteenth Report of the Federal Costs Advisory Committee on solicitors' 
costs in the Family Court of Australia. 
 
2. 
The present scale is contained in Schedule 3 to the Family Law Rules made under the 
Family Law Act 1975.  The last amendment to this scale took effect on 29 March 2004 
following the adoption of the Eighteenth Report by this Committee which recommended an 
increase of 3.2 per cent in the scale of costs.  The recommendation took into account the 
Consumer Price Index (CPI) at June 2003; and the Wage Cost Index (WCI) at June 2003 
published by the Australian Bureau of Statistics (ABS). 
 
3. 
The Committee is comprised of the following members: 
 
a)  The Hon Brian Lacy (Chairman), 
 
b)  Mr D A Crawford, 
 
c)  Mr D C D Harper, 
 
d)  Mr B McMillan, 
 
e)  Mr M Minogue, and 
 
f)  Mr W D K Teasdale. 
 
4. 
By an advertisement placed in the Australian Financial Review on 1 August 2003 and 
in The Weekend Australian of 2 August 2003, the Committee invited interested persons and 
organisations to forward written submissions to the Committee Secretary by 22 August 2003.  
The Committee did not meet in 2003.  The Committee held a public hearing on 1 September 
2004. 
 
SUBMISSIONS 
 
5. 
The Law Council of Australia (LCA) made the only substantive submission to the 
Committee.  The LCA made a submission in August 2003, and a subsequent submission on 
26 August 2004.  The LCA also made an oral submission to the Committee in the hearing on 
1 September 2004.  The LCA welcomed the new chair and expressed its appreciation for the 
tremendous contribution made by the former Chairperson, the late Senior Deputy President 
Polites, to the Committee’s proceedings and work over many years. 
 

Attorney-General's Department documents released under FOI22/171
Page 31 of 48

Document 6 - Page 2 of 6
 
The LCA’s substantive submissions are summarised below: 
 
a)  Approach 
 
 
The LCA recommended the Committee maintain the current approach for the 
adjustment of fee scales. 
 
b)  Weightings 
 
 
The LCA recommended the following formula weightings: 
 
Salaries and Wages 
38% 
Other Overheads 
32% 
Partners’ Salaries and Profit Share  30% 
 
c)  Calculations 
 
The LCA: 
 
(i) 
supported the continued use of the ABS WCI for salaries and wages and 
partner’s salaries and profit share and the net income components of 
solicitors’ costs 
(ii) 
supported the continued use of the ABS WCI ‘ordinary-time hourly rates 
of pay including bonuses’ index 
(iii)  supported the continued use of the CPI as the primary index for the 
adjustment of the “Other Overheads” component 
(iv)  opposed discounting of the CPI by reference to the Constant Tax Rate 
Measure (CTRM) adjustment of the CPI. 
 
d)  Superannuation Guarantee Levy (SGL) 
 
 
The LCA sought an adjustment by reference to the 1% increase in the SGL 
effective from 1 July 2002. 
 
e)  Professional Indemnity Insurance 
 
The LCA asked that the Committee note the potential impact of increasing 
professional indemnity insurance premiums on solicitor’s overheads.  The LCA 
referred to a report commissioned by the Australian Government from the 
Australian Competition and Consumer Commission entitled ‘Public Liability and 
Professional Indemnity Insurance –  Third Monitoring Report’ (July 2004) and 
recommended an increase of 2.04% to the Other Overheads component to reflect 
the increase in professional indemnity insurance premiums. 
 
f) 
Adjustment 
 
 
The LCA recommended an increase of 10.2% in the scale of fees. 
 

 
Attorney-General's Department documents released under FOI22/171
Page 32 of 48

Document 6 - Page 3 of 6
 
TERMS OF REFERENCE 

 
6. 
The Committee noted the revised terms of reference approved by the former 
Attorney-General on 29 April 2002, noting the inclusion of the Federal Magistrates Service, 
the exclusion of ACT Courts, and the incorporation of Bankruptcy Costs into the general 
Federal Court scale. 
 
CONSIDERATION OF THE ISSUES 
 
Scope of the Committee’s Power 

 
7. 
The Terms of Reference of the Committee confine it to advising Commonwealth Courts 
on:  
 
“. . .variations in the quantum of costs for solicitors (including expenses and fees for 
witnesses) which should be fixed in the rules and regulations for which they are 
respectively responsible.” 
 
8. 
The Committee noted, as it had in the past, that any increase in scales will impact on 
consumers of legal services.  However, the terms of reference of the Committee contain the 
following provisions: 
 
a) 
that the Committee is to have regard to the reasonable expenses incurred by 
solicitors in the conduct of their practices and the need for them to recover, in 
full, increases in these expenses; and 
 
b) 

the need for solicitors’ costs to be consistent with a reasonable return on 
capital and to provide appropriate recognition of professional skills. 
 
General Approach of the Committee 
 
9. 
The Committee considered it should maintain its longstanding approach to adjustment 
of the Scales of Costs in accordance with a formula reflecting movements in salary and 
wages, other overheads and an appropriate return for principals in legal practice. 
 
Weighting of Components 

 
10.  The Committee accepted the submission by the LCA that ABS statistical information 
supports a change in the weightings allocated to components of the formula for the purposes 
of calculating recommended increases in fee scales.  The validity of changing the weightings 
was confirmed to the satisfaction of the Committee. 
 
11.  The weightings are: 
 
a)  Salaries and Wages:   
 
 
38%; 
 
b)  Other Overheads: 
 
 
 
32%; and 
 
c)  Partners’ Salaries and Profit Share: 
30%. 
 

 
Attorney-General's Department documents released under FOI22/171
Page 33 of 48

Document 6 - Page 4 of 6
 
Formula Indices 

 
Wage Cost Index 
 
12.  The Committee agreed to continue with the use of the WCI for calculation of the wages 
& salaries and profit share component of the formula.  The WCI, reflecting ordinary time 
rates of pay including bonuses, was adopted in the Sixteenth Report.  The Committee is 
satisfied that this index is conceptually satisfactory despite its potential for some volatility. 
The material put to the Committee suggests that volatility was not a problem in the period 
under review.  
 
13.  The most recent data available is the WCI for the June Quarter 2004. 
 
The CPI 
 
14.  The LCA raised the issue of the use of the CTRM following the introduction of the New 
Tax System.  The LCA noted that the Committee’s 18th Report recommended reverting to the 
use of the unadjusted CPI figure in relation to the calculation of the ‘other overheads’ 
component.  The LCA recommended the continued use of that approach.  The Committee 
agreed with the LCA recommendation. 
 
15.  The CPI for the June Quarter 2004 is the most recent data available. 
 
Superannuation Guarantee Levy (SGL) 

 
16.  The Committee accepted the submission of the LCA that an adjustment should be made 
to the Wages and Salaries component to reflect the 1% increase in the SGL, operative from 
1 July 2002.   
 
Professional Indemnity Insurance
 
 
17.  The Committee noted the material provided  by the LCA concerning the likely 
continuing increase of professional indemnity insurance premiums. 
 
18.  The Committee acknowledged the LCA’s concerns.  The evidence established to the 
satisfaction of the Committee that an allowance for this item is justified.  While noting the 
difficulty in calculating with precision the value of the increase the Committee accepted the 
formula that was advanced by the LCA in its submission that an adjustment should be made 
in the Other Overheads Component to reflect the increase of approximately 0.93% of the total 
costs for legal practices.  Expressed as a proportion of the elements of all other legal practice 
costs in the Other Overheads Component the increase in professional indemnity costs is 2.04 
per cent. 
 
19. 
The Committee noted the transient nature of the rise and fall in Professional Indemnity 
Insurance and considered it as a special item in the Other Overheads Component for the 
purpose of this review.  Professional Indemnity Insurance will not be included as a permanent 
element of the Other Overheads Component, but may be revisited in the event of any future 
significant rise or fall. 
 
 

 
Attorney-General's Department documents released under FOI22/171
Page 34 of 48

Document 6 - Page 5 of 6
SUMMARY OF FINDINGS 
 
19.  The Committee: 
 
a)  affirms its general approach to adjustment of the scales, 
 
b)  is satisfied that no discount to the CPI for the second round effect of the New Tax 
System is necessary, and 
 
c)  acknowledges the LCA’s concern regarding professional indemnity insurance 
premiums. 
 
20.  These findings lead the Committee to recommend an increase of 10.2 per cent in the 
scales.  This reflects movements in the relevant published indices from March 2002 to 
June 2004 for CPI and from December 2001 to June 2004 for WCI.  Detailed calculations are 
as follows: 
 
a)  Movements in Indices (with ABS adjustment) 
 
 
At March 2002 
At June 2004 
% Increase 
 
 
 
 
 
CPI 
136.6 
144.8 
6.00 
 
 
 
 
 
 
At December 2001 
At June 2004 
% Increase 
 
 
 
 
 
WCI 
114.5 
124.3 
8.56 
 
 
b)   Solicitors' Costs 
 
 
% of Gross Costs 
Movement in 
% Increase 
Relevant Indices (%) 
Wages and Salaries 
38 
9.56 
3.63 
(2002 – 35%) 
(reflects WCI plus 
1.00% for additional 
Superannuation 
Guarantee 
adjustment) 
 
 
 
 
Other Overheads 
32 
6.00 
3.96 
(2002 – 34%) 
 
(reflects CPI plus 
2.04% for 
Professional 
Indemnity 
Insurance Premium 
Adjustment) 
 

 
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Document 6 - Page 6 of 6
 
 
 
 
Partners’ Salaries 
30 
8.56 
2.57 
and Profit Share 
(2002 – 31%) 
 
 
 
 
Sub-total 
10.16 
 
 
 
 
Recommended 
 
Increase 
10.2 
 
 
RECOMMENDATION 

 
21.  The Committee recommends an increase of 10.2 percent to the scale of solicitors' costs 
specified in the Third Schedule to the Family Law Rules. 
 
 
 
 
 
 
B J Lacy 

Chairman 
 
22 September 2004 
 
 

 
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Document 7 - Page 1 of 6
FEDERAL COSTS ADVISORY COMMITTEE 
 
SECOND REPORT ON SOLICITORS' COSTS 
 
UNDER THE FEDERAL MAGISTRATES COURT RULES 
 
 
PRELIMINARY 
 
1. 
This is the Second Report of the Federal Costs Advisory Committee on solicitors' costs 
in the Federal Magistrates Court of Australia. 
 
2. 
The present scale is contained in the First Schedule of the Federal Magistrates Court 
Rules.  The last amendment to this scale took effect on 3 November 2003 following the 
adoption of the First Report by this Committee which recommended an increase of 3.2 per 
cent in the scale of costs.  The recommendation took into account the Consumer Price Index 
(CPI) at June 2003; and the Wage Cost Index (WCI) at June 2003 published by the Australian 
Bureau of Statistics (ABS). 
 
3. 
The Committee is comprised of the following members: 
 
a)  The Hon Brian Lacy (Chairman), 
 
b)  Mr D A Crawford, 
 
c)  Mr D C D Harper, 
 
d)  Mr B McMillan, 
 
e)  Mr M Minogue, and 
 
f)  Mr W D K Teasdale. 
 
4. 
By an advertisement placed in the Australian Financial Review on 1 August 2003 and 
in The Weekend Australian of 2 August 2003, the Committee invited interested persons and 
organisations to forward written submissions to the Committee Secretary by 22 August 2003.  
The Committee did not meet in 2003.  The Committee held a public hearing on 1 September 
2004. 
 
SUBMISSIONS 
 
5. 
The Law Council of Australia (LCA) made the only substantive submission to the 
Committee.  The LCA made a submission in August 2003, and a subsequent submission on 
26 August 2004.  The LCA also made an oral submission to the Committee in the hearing on 
1 September 2004.  The LCA welcomed the new chair and expressed its appreciation for the 
tremendous contribution made by the former Chairperson, the late Senior Deputy President 
Polites, in the Committee’s proceedings and work over many years. 
 

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Document 7 - Page 2 of 6
 
The LCA’s substantive submissions are summarised below: 
 
a)  Approach 
 
 
The LCA recommended the Committee maintain the current approach for the 
adjustment of fee scales. 
 
b)  Weightings 
 
 
The LCA recommended the following formula weightings: 
 
Salaries and Wages 
38% 
Other Overheads 
32% 
Partners’ Salaries and Profit Share  30% 
 
c)  Calculations 
 
The LCA: 
 
(i) 
supported the continued use of the ABS WCI for salaries and wages and 
partner’s salaries and profit share and the net income components of 
solicitors’ costs 
(ii) 
supported the continued use of the ABS WCI ‘ordinary-time hourly rates 
of pay including bonuses’ index 
(iii)  supported the continued use of the CPI as the primary index for the 
adjustment of the “Other Overheads” component 
(iv)  opposed discounting of the CPI by reference to the Constant Tax Rate 
Measure (CTRM) adjustment of the CPI. 
 
d)  Superannuation Guarantee Levy (SGL) 
 
 
The LCA sought an adjustment by reference to the 1% increase in the SGL 
effective from 1 July 2002. 
 
e)  Professional Indemnity Insurance 
 
The LCA asked that the Committee note the potential impact of increasing 
professional indemnity insurance premiums on solicitor’s overheads.  The LCA 
referred to a report commissioned by the Australian Government from  the 
Australian Competition and Consumer Commission entitled ‘Public Liability and 
Professional Indemnity Insurance –  Third Monitoring Report’ (July 2004) and 
recommended an increase of 2.04% to the Other Overheads component to reflect 
the increase in professional indemnity insurance premiums. 
 
f) 
Adjustment 
 
 
The LCA recommended an increase of 10.2% in the scale of fees. 
 

 
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Document 7 - Page 3 of 6
 
TERMS OF REFERENCE 

 
6. 
The Committee noted the revised terms of reference approved by the former 
Attorney-General on 29 April 2002, noting the inclusion of the Federal Magistrates Service, 
the exclusion of ACT Courts, and the incorporation of Bankruptcy Costs into the general 
Federal Court scale. 
 
CONSIDERATION OF THE ISSUES 
 
Scope of the Committee’s Power 

 
7. 
The Terms of Reference of the Committee confine it to advising Commonwealth Courts 
on:  
 
“. . .variations in the quantum of costs for solicitors (including expenses and fees for 
witnesses) which should be fixed in the rules and regulations for which they are 
respectively responsible.” 
 
8. 
The Committee noted, as it had in the past, that any increase in scales will impact on 
consumers of legal services.  However, the terms of reference of the Committee contain the 
following provisions: 
 
a) 
that the Committee is to have regard to the reasonable expenses incurred by 
solicitors in the conduct of their practices and the need for them to recover, in 
full, increases in these expenses; and 
 
b) 

the need for solicitors’ costs to be consistent with a reasonable return on 
capital and to provide appropriate recognition of professional skills. 
 
General Approach of the Committee 
 
9. 
The Committee considered it should maintain its longstanding approach to adjustment 
of the Scales of Costs in accordance with a formula reflecting movements in salary and 
wages, other overheads and an appropriate return for principals in legal practice. 
 
Weighting of Components 

 
10.  The Committee accepted the submission by the LCA that ABS statistical information 
supports a change in the weightings allocated to components of the formula for the purposes 
of calculating recommended increases in fee scales.  The validity of changing the weightings 
was confirmed to the satisfaction of the Committee. 
 
11.  The weightings are: 
 
a)  Salaries and Wages:   
 
 
38%; 
 
b)  Other Overheads: 
 
 
 
32%; and 
 
c)  Partners’ Salaries and Profit Share: 
30%. 
 

 
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Document 7 - Page 4 of 6
 
Formula Indices 

 
Wage Cost Index 
 
12.  The Committee agreed to continue with the use of the WCI for calculation of the wages 
& salaries and profit share component of the formula.  The WCI, reflecting ordinary time 
rates of pay including bonuses, was adopted in the Sixteenth Report.  The Committee is 
satisfied that this index is conceptually satisfactory despite its potential for some volatility. 
The material put to the Committee suggests that volatility was not a problem in the period 
under review.  
 
13.  The most recent data available is the WCI for the June Quarter 2004. 
 
The CPI 
 
14.  The LCA raised the issue of the use of the CTRM following the introduction of the New 
Tax System.  The LCA noted that the Committee’s 18th Report recommended reverting to the 
use of the unadjusted CPI figure in relation to the calculation of the ‘other overheads’ 
component.  The LCA recommended the continued use of that approach.  The Committee 
agreed with the LCA recommendation. 
 
15.  The CPI for the June Quarter 2004 is the most recent data available. 
 
Superannuation Guarantee Levy (SGL) 

 
16.  The Committee accepted the submission of the LCA that an adjustment should be made 
to the Wages and Salaries component to reflect the 1% increase in the SGL, operative from 
1 July 2002.   
 
Professional Indemnity Insurance
 
 
17.  The Committee noted the material provided by the LCA concerning the likely 
continuing increase of professional indemnity insurance premiums. 
 
18.  The Committee acknowledged the LCA’s concerns.  The evidence established to the 
satisfaction of the Committee that an allowance for this item is justified.  While noting the 
difficulty in calculating with precision the value of the increase the Committee accepted the 
formula that was advanced by the LCA in its submission that an adjustment should be made 
in the Other Overheads Component to reflect the increase of approximately 0.93% of the total 
costs for legal practices.  Expressed as a proportion of the elements of all other legal practice 
costs in the Other Overheads Component the increase in professional indemnity costs is 2.04 
per cent. 
 
19. 
The Committee noted the transient nature of the rise and fall in Professional Indemnity 
Insurance and considered it as a special item in the Other Overheads Component for the 
purpose of this review.  Professional Indemnity Insurance will not be included as a permanent 
element of the Other Overheads Component, but may be revisited in the event of any future 
significant rise or fall. 
 
 

 
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Document 7 - Page 5 of 6
SUMMARY OF FINDINGS 
 
19.  The Committee: 
 
a)  affirms its general approach to adjustment of the scales, 
 
b)  is satisfied that no discount to the CPI for the second round effect of the New Tax 
System is necessary, and 
 
c)  acknowledges the LCA’s concern regarding professional indemnity insurance 
premiums. 
 
20.  These findings lead the Committee to recommend an increase of 10.2 per cent in the 
scales.  This reflects movements in the relevant published indices from March 2002 to 
June 2004 for CPI and from December 2001 to June 2004 for WCI.  Detailed calculations are 
as follows: 
 
a)  Movements in Indices (with ABS adjustment) 
 
 
At March 2002 
At June 2004 
% Increase 
 
 
 
 
 
CPI 
136.6 
144.8 
6.00 
 
 
 
 
 
 
At December 2001 
At June 2004 
% Increase 
 
 
 
 
 
WCI 
114.5 
124.3 
8.56 
 
 
b)   Solicitors' Costs 
 
 
% of Gross Costs 
Movement in 
% Increase 
Relevant Indices (%) 
Wages and Salaries 
38 
9.56 
3.63 
(2002 – 35%) 
(reflects WCI plus 
1.00% for additional 
Superannuation 
Guarantee 
adjustment) 
 
 
 
 
Other Overheads 
32 
6.00 
3.96 
(2002 – 34%) 
 
(reflects CPI 
plus 2.04% for 
Professional 
Indemnity 
nsurance Premium 
Adjustment) 
 

 
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Document 7 - Page 6 of 6
 
 
 
 
Partners’ Salaries 
30 
8.56 
2.57 
and Profit Share 
(2002 – 31%) 
 
 
 
 
Sub-total 
10.16 
 
 
 
 
Recommended 
 
Increase 
10.2 
 
 
RECOMMENDATION 

 
21.  The Committee recommends an increase of 10.2 percent to the scale of solicitors' costs 
specified in First Schedule to the Federal Magistrates Court Rules.  . 
 
 
 
 
 
 
B J Lacy 

Chairman 
 
22 September 2004 
 
 

 
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Document 8 - Page 1 of 6
FEDERAL COSTS ADVISORY COMMITTEE
NINETEENTH REPORT ON SOLICITORS' COSTS
UNDER THE FEDERAL COURT ACT 1976
PRELIMINARY
1.
This is the Nineteenth Report of the Federal Costs Advisory Committee on solicitors' costs
in the Federal Court of Australia.
2.
The present scale is contained in the Second Schedule of Rules made under the Federal
Court of Australia Act 1976.  The last amendment to this scale took effect on 26 November 2002
following the adoption of the Eighteenth Report by this Committee which recommended an
increase of 3.2 per cent in the scale of costs.  The recommendation took into account the Consumer
Price Index (CPI) at June 2003; and the Wage Cost Index (WCI) at June 2003 published by the
Australian Bureau of Statistics (ABS).
3.
The Committee is comprised of the following members:
a)
The Hon Brian Lacy (Chairman),
b)
Mr D A Crawford,
c) Mr D C D Harper,
d)
Mr B McMillan,
e)
Mr M Minogue, and
f)
Mr W D K Teasdale.
4.
By an advertisement placed in the Australian Financial Review on 1 August 2003 and in 
The Weekend Australian of 2 August 2003, the Committee invited interested persons and
organisations to forward written submissions to the Committee Secretary by 22 August 2003.  The
Committee did not meet in 2003.  The Committee held a public hearing on 1 September 2004.
SUBMISSIONS
5.
The Law Council of Australia (LCA) made the only substantive submission to the
Committee.  The LCA made a submission in August 2003, and a subsequent submission on 26
August 2004.  The LCA also made an oral submission to the Committee in the hearing on 1
September 2004.  The LCA welcomed the new chair and expressed its appreciation for the
tremendous contribution made by the former Chairperson, the late Senior Deputy President Polites,
to the Committee’s proceedings and work over many years.
1
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Document 8 - Page 2 of 6
The LCA’s substantive submissions are summarised below:
a)
Approach
The LCA recommended the Committee maintain the current approach for the
adjustment of fee scales.
b)
Weightings
The LCA recommended the following formula weightings:
Salaries and Wages
38%
Other Overheads
32%
Partners’ Salaries and Profit Share
30%
c)
Calculations 
The LCA:
(i)
supported the continued use of the ABS WCI for salaries and wages and
partner’s salaries and profit share and the net income components of solicitors’
costs
(ii)
supported the continued use of the ABS WCI ‘ordinary-time hourly rates of pay
including bonuses’ index
(iii)
supported the continued use of the CPI as the primary index for the adjustment
of the “Other Overheads” component
(iv)
opposed discounting of the CPI by reference to the Constant Tax Rate Measure
(CTRM) adjustment of the CPI.
d)
Superannuation Guarantee Levy (SGL)
The LCA sought an adjustment by reference to the 1% increase in the SGL effective
from 1 July 2002.
e)
Professional Indemnity Insurance
The LCA asked that the Committee note the potential impact of increasing professional
indemnity insurance premiums on solicitor’s overheads.  The LCA referred to a report
commissioned by the Australian Government from the Australian Competition and
Consumer Commission entitled ‘Public Liability and Professional Indemnity Insurance
– Third Monitoring Report’ (July 2004) and recommended an increase of 2.04% to the
Other Overheads component to reflect the increase in professional indemnity insurance
premiums.
f)
Adjustment
The LCA recommended an increase of 10.2% in the scale of fees.
2
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Document 8 - Page 3 of 6
TERMS OF REFERENCE
6.
The Committee noted the revised terms of reference approved by the former 
Attorney-General on 29 April 2002, noting the inclusion of the Federal Magistrates Service, the
exclusion of ACT Courts, and the incorporation of Bankruptcy Costs into the general Federal Court
scale.
CONSIDERATION OF THE ISSUES 
Scope of the Committee’s Power
7.
The Terms of Reference of the Committee confine it to advising Commonwealth Courts on: 
“. . .variations in the quantum of costs for solicitors (including expenses and fees for witnesses)
which should be fixed in the rules and regulations for which they are respectively
responsible.”

8.
The Committee noted, as it had in the past, that any increase in scales will impact on
consumers of legal services.  However, the terms of reference of the Committee contain the
following provisions:
a)
that the Committee is to have regard to the reasonable expenses incurred by
solicitors in the conduct of their practices and the need for them to recover, in full,
increases in these expenses; and

b)
the need for solicitors’ costs to be consistent with a reasonable return on capital and
to provide appropriate recognition of professional skills.

General Approach of the Committee
9.
The Committee considered it should maintain its longstanding approach to adjustment of the
Scales of Costs in accordance with a formula reflecting movements in salary and wages, other
overheads and an appropriate return for principals in legal practice.
Weighting of Components
10.
The Committee accepted the submission by the LCA that ABS statistical information
supports a change in the weightings allocated to components of the formula for the purposes of
calculating recommended increases in fee scales.  The validity of changing the weightings was
confirmed to the satisfaction of the Committee.
11.
The weightings are:
a)
Salaries and Wages:
38%;
b)
Other Overheads:
32%; and
c)
Partners’ Salaries and Profit Share:
30%.
Formula Indices 
3
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Document 8 - Page 4 of 6
Wage Cost Index
12.
The Committee agreed to continue with the use of the WCI for calculation of the wages &
salaries and profit share component of the formula.  The WCI, reflecting ordinary time rates of pay
including bonuses, was adopted in the Sixteenth Report.  The Committee is satisfied that this index
is conceptually satisfactory despite its potential for some volatility.  The material put to the
Committee suggests that volatility was not a problem in the period under review. 
13.
The most recent data available is the WCI for the June Quarter 2004.
The CPI
14.
The LCA raised the issue of the use of the CTRM following the introduction of the New
Tax System.  The LCA noted that the Committee’s 18th Report recommended reverting to the use
of the unadjusted CPI figure in relation to the calculation of the ‘other overheads’ component.  The
LCA recommended the continued use of that approach.  The Committee agreed with the LCA
recommendation.
15.
The CPI for the June Quarter 2004 is the most recent data available.
Superannuation Guarantee Levy (SGL)
16.
The Committee accepted the submission of the LCA that an adjustment should be made to the
Wages and Salaries component to reflect the 1% increase in the SGL, operative from 1 July 2002.  
Professional Indemnity Insurance
17.
The Committee noted the material provided by the LCA concerning the likely continuing
increase of professional indemnity insurance premiums.
18.
The Committee acknowledged the LCA’s concerns.  The evidence established to the
satisfaction of the Committee that an allowance for this item is justified.  While noting the difficulty
in calculating with precision the value of the increase the Committee accepted the formula that was
advanced by the LCA in its submission that an adjustment should be made in the Other Overheads
Component to reflect the increase of approximately 0.93% of the total costs for legal practices.
Expressed as a proportion of the elements of all other legal practice costs in the Other Overheads
Component the increase in professional indemnity costs is 2.04 per cent.
19.
The Committee noted the transient nature of the rise and fall in Professional Indemnity
Insurance and considered it as a special item in the Other Overheads Component for the purpose of
this review.  Professional Indemnity Insurance will not be included as a permanent element of the
Other Overheads Component, but may be revisited in the event of any future significant rise or fall.
SUMMARY OF FINDINGS 
19.
The Committee:
a)
affirms its general approach to adjustment of the scales,
b)
is satisfied that no discount to the CPI for the second round effect of the New Tax
System is necessary, and
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Document 8 - Page 5 of 6
c)
acknowledges the LCA’s concern regarding professional indemnity insurance
premiums.
20.
These findings lead the Committee to recommend an increase of 10.2 per cent in the scales.
This reflects movements in the relevant published indices from March 2002 to June 2004 for CPI
and from December 2001 to June 2004 for WCI.  Detailed calculations are as follows:
a) 
Movements in Indices (with ABS adjustment)
 
At March 2002
At June 2004
% Increase
CPI
136.6
144.8
6.00
 
 
 
 
 
At December 2001
At June 2004
% Increase
WCI
114.5
124.3
8.56
b) 
Solicitors' Costs
 
% of Gross Costs
Movement in
% Increase
Relevant Indices (%)
Wages and Salaries
38
9.56
3.63
(2002 – 35%)
(reflects WCI plus
1.00% for additional
Superannuation
Guarantee
adjustment)
Other Overheads
32
6.00
3.96
(2002 – 34%)
(reflects CPI plus
2.04% for
Professional
Indemnity
Insurance Premium
Adjustment)
Partners’ Salaries
30
8.56
2.57
and Profit Share
(2002 – 31%)
 
 
Sub-total
10.16
 
 
Recommended
Increase

10.2
RECOMMENDATION
21.
The Committee recommends an increase of 10.2 percent to the scale of solicitors' costs
specified in the Second Schedule of Rules made under the Federal Court of Australia Act 1976.
5
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Document 8 - Page 6 of 6
B J Lacy
Chairman

22 September 2004
6
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