Supreme Court simplifies requirements for accounting of legal aid expenses

The Supreme Court considers it admissible to reasonably indicate in the act of work performed by an attorney only the cost of the entire amount of work performed by him or her, without linking such work to its hourly or fixed cost.

This conclusion was made by the Administrative Court of Cassation in its decision of January 23, 2025 in case No. 240/32993/23, the text of which appeared in the Unified State Register of Court Decisions.

The Administrative Court granted the company's claim against the State Labor Service to cancel the fine, but dismissed the application for recovery of legal fees. The submitted documents did not specify the cost of one hour of a lawyer's work or the cost of a certain type of work. And this, in the court's opinion, made it impossible to establish a mechanism for calculating the attorney's fee.

The appellate court overturned the decision and ordered the company to recover the costs of professional legal assistance, ruling that the claimed costs were documented and commensurate with the complexity of the case, the scope of services provided by the lawyer and the work performed.

The government agency filed a cassation appeal with the Supreme Court. The SLS insisted that in determining the amount of compensation, the court should proceed from the criterion of the reality of attorneys' fees (establishing their validity and necessity), as well as the criterion of the reasonableness of their amount, based on the specific circumstances of the case and the financial situation of both parties. And the documents provided by the company did not contain the procedure for payment for the legal assistance provided, the amount and procedure for calculating the attorney's fee (either hourly or fixed), which does not allow both the court and the other party to the dispute to verify the parties' actual agreement on the amount of the attorney's fee.

The high judges proceeded from the fact that in accordance with Article 134 of the Code of Administrative Procedure, in order to determine the amount of legal aid expenses and for the purpose of distributing court costs, a party to the case shall submit a detailed description of the work (services) performed by the attorney and the expenses incurred by him/her necessary for the provision of legal aid.

In this case, the amount of expenses for the attorney's fees shall be commensurate with:

1) the complexity of the case and the work (services) performed by the advocate;

2) the time spent by the advocate to perform the relevant work (render services);

3) the scope of services rendered by the advocate and work performed;

4) the price of the claim and (or) the importance of the case for the party, including the impact of the case resolution on the reputation of the party or public interest in the case.

The burden of proving the disproportionality of the costs is on the party applying for a reduction of the attorney's fees to be shared between the parties.

Thus, when determining the amount of compensation for expenses incurred for legal aid, the subject of proof in the issue of compensation for legal aid expenses incurred in connection with the consideration of the case must be investigated on the basis of appropriate and admissible evidence the amount of services and work actually provided by the attorney, the amount of time spent, the amount of the fee, the proportionality of the services to the categories of complexity of the case, the time spent by the attorney, the amount of services provided, the price of the claim and the importance of the case.

At the same time, the CAP noted that despite the fact that the court uses a fairly wide discretion when applying the criterion of proportionality of the costs of attorney's fees, such a criterion should nevertheless be based on the criteria set forth in Article 134 of the CAP. These criteria are applied by the court if the party indicating the disproportionality of the expenses provides evidence and justification of the inconsistency of the claimed expenses with these criteria.

During the trial of the case in the court of first instance, the attorney performed professional legal assistance services to the plaintiff in the consideration of this case on the basis of a legal assistance agreement.

The plaintiff's claims for reimbursement of his professional legal aid expenses were based on the fact that for performing the duties of a representative, the client pays the lawyer a fee, the amount of which is set in accordance with an additional agreement, the scope of work performed is indicated in the act of work performed.

In this supplemental agreement, the parties agreed, inter alia, that the client shall pay the attorney a success fee, the scope of work being specified in the act of work performed.

The company submitted such an act to confirm the actual provision of services by the lawyer and the expenses incurred in this regard. According to this document, the claimed cost of services (UAH 8.5 thousand) consisted of a preliminary study of written materials (UAH 6 thousand), participation in a court hearing (UAH 1.5 thousand), and submission of procedural documents (UAH 1 thousand).

The panel of judges noted that the Supreme Court has established a well-established practice on the recovery of legal aid costs: when determining the amount of compensation for expenses incurred for professional legal aid, it is necessary to examine the amount of services and work actually provided by the lawyer, the amount of time spent, the amount of the fee, the proportionality of the services to the categories of complexity of the case, the time spent by the lawyer, the amount of services provided, the price of the claim and (or) the significance of the case. In determining the amount of compensation for expenses incurred for professional legal aid, the court should be guided by the criterion of the reality of attorney's fees (establishing their validity and necessity), as well as the criterion of the reasonableness of their amount, based on the specific circumstances of the case and the nature of the services performed.

Given the scope of the services provided, the court concluded that the amount of the expenses was proportionate to the complexity of the case and the legal assistance provided by the lawyer.

At the same time, the panel disagreed with the defendant's arguments that it was necessary to indicate in the act of work performed by the lawyer the calculation of the cost of such work on an hourly basis or to indicate such cost in a fixed amount.

This is because the party to the case is required to provide evidence of the scope of services and work performed and their cost paid or payable by the relevant party or third party, but not evidence of the time spent by the legal professional, since the content of the said procedural law rules suggests that it is sufficient to confirm only the amount of such time, but not to justify how much time was spent on the relevant actions.

Taking into account the above, the CAP agreed with the conclusion of the court of appeal that it is necessary to recover from the State Labor Service in favor of the company the legal aid costs incurred by it.

«Such a decision reduces the 'administrative' burden on attorneys, - said Valentyn Gvozdiy, the Vice President of the UNBA, BCU. - Because the Supreme Court confirmed that there is no need to detail each hour spent or set a fixed fee in the act of work performed. It is enough to indicate the total cost of services with a brief description of the work performed».

He also believes that this position reduces the formal reasons for refusing to reimburse expenses. «The Supreme Court has shown that the key is to justify the proportionality of the fee to the complexity of the case. It will become easier for lawyers to work with fixed or success fees without the risk that the court will refuse to reimburse such expenses due to the lack of hourly calculation», - explained V. Gvozdiy.

At the same time, he noted that attorneys should clearly state the terms of payment and the method of determining the fee in their agreements with clients to avoid disputes. «Since the courts still assess the proportionality of the costs, there may be situations when, without detailed accounting, the court will consider the costs to be overstated and adjust them downward. Therefore, lawyers in any case need to justify the amount of expenses, for example, through market rates or the complexity of the case», - said the Vice President of the UNBA, BCU.