Costs Agreements and Firm Changes: A Recent NSW Reminder

When a lawyer leaves one firm and continues a client's matter at another, what happens to the costs agreement the client originally signed? And who is entitled to recover the fees for work already done? A recent decision of the District Court of New South Wales offers valuable guidance.

The background

In Ugur v Dianna Kovacevic Lawyers Pty Ltd [2026] NSWDC 184, the client originally retained Dribbus Kovacevic Lawyers (DKL) under a costs agreement in 2017 to act in a family law matter. In 2018, the partnership behind DKL dissolved, and the lawyer with carriage of the matter, Ms Kovacevic, began practising through a new firm.

The client received an email describing the change as a "relocation" and later attended the new office, where he signed an authority directing that his file and trust monies be transferred to the new practice so it could continue acting for him. When a dispute later arose over fees, a costs assessor and then a review panel reached different conclusions about whether the client was liable to the new firm for work performed by DKL before the change. The client appealed.

The Court's findings

The Court accepted that, viewed objectively, the authority was sufficient to create an implied novation: the new firm replaced DKL as the contracting party for the ongoing retainer. The lawyer's continued conduct of the matter, combined with the transfer of the file and trust funds, pointed clearly to that substitution.

However, the Court drew a critical distinction. A novation creates a new contract in place of the old one; it does not automatically carry across accrued rights and obligations under the original agreement. Unless the parties expressly or impliedly agree otherwise, fees incurred before the novation do not transfer to the new arrangement.

Here, there was no such agreement. As a practical matter, the Court noted a client would likely want to know the extent of any existing costs liability before agreeing to be bound for it. The earlier costs were therefore disallowed, reducing the assessed amount by $52,000 (from $314,775 to $262,775).

The takeaway

The decision is a useful reminder for practitioners. When files move between practices, clear written terms are essential—particularly about who is responsible for costs incurred before the transfer. A well-drafted authority or fresh costs agreement can avoid exactly this kind of dispute.