In a speech entitled ‘Billable hours, past their use-by date’, the Hon Wayne Martin, Chief Justice of Western Australia, said the profession should “enthusiastically embrace the pressure for change, and generally adopt alternative methods of charging for services rendered”.

In making the call for change, Justice Martin said time billing focuses the efforts of the legal practitioner upon the production of billable hours, rather than the production of value for the client. “It rewards efforts and not results, promoted quantity over quality, repetition over creativity.”

He said time costing fosters a “production mentality”, which discourages efficiency or innovation because a lawyers’ bills and profit are reduced by the development of efficiencies.

“Cost plus billing is the antithesis of efficiency, and encourages the service provider to increase cost, thereby increasing profits,” he said.

He also noted that most major law firms have significant resources deployed in time-recording and billing, as well as data analysis, all costs that are then passed on to the client.

Justice martin also criticised the cross-subsidisation among clients that occurs when a law firm uses time billing.

“So when new legislation is introduced, the first client to require services relating to that legislation will pay for the firm’s acquisition of knowledge in that area, through the time required to come up to speed.

“The next client will get the benefit of that knowledge, at no cost. The first client is therefore effectively subsidising the second client. The same occurs whenever a lawyer takes on an area of work with which he or she is unfamiliar,” he said.

He added that time billing stymies good communication between a client and lawyer, as the more communication there is, the higher the cost.

“There is a natural disinclination to communicate with the lawyer, even on important issues like billing and the progress of the case.”

Meanwhile, lawyers within firms compete with each other on the production of billable hours, said Justice Martin, discouraging collegiality and mutual cooperation between lawyers.

On top of this, competitive practitioners within a firm have a tendency to hoard work to ensure they fulfil their quota of target hours. This, said Justice Martin, means some low-level work can be performed by high-level associates, increasing cost to the client and decreasing general efficiency.

Literature is replete with complaints from young practitioners about the unsatisfying nature of legal work in a time billing environment, said the judge.

An emphasis on the production of billable hours creates a working environment that “discourages professionalism and reduces work satisfaction to unacceptable levels”.

“Clever young lawyers are leaving the profession in droves, or shifting to corporate, government and NGO roles where their motivation is provided, and their performance assed by outcomes other than the production of billable hours,” he said.

He also pointed to the high levels of depression and substance abuse detected amongst lawyers.

Justice Martin said: “Time billing can have alienating, and worse impacts, upon lawyers. Those many lawyers who come to the profession motivated, at least in part, by idealism and altruism, and a desire to help the clients they serve, may instead find a competitive and relentlessly demanding environment driven by commercial imperatives.”

Justice Martin cited a Law Reform Commission of Western Australia report in 1999, which covered the incentive which time costing provided for the undertaking of unnecessary work and the maintenance of inefficient ways of doing work.

The Commission recommended that the legal profession, in consultation with those responsible in the courts for the taxation of legal costs and the public, should be invited to inquire into appropriate methods of billing, with a view to reduce the prominence of time costing as a method for calculating professional fees.