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Legal fees report far from conclusive

Legal fees report far from conclusive

AS NEW South Wales is spearheading moves to impose heavy penalties on lawyers who don’t comply with fee disclosure, some are raising questions about the validity of a report undertaken by the…

AS NEW South Wales is spearheading moves to impose heavy penalties on lawyers who don’t comply with fee disclosure, some are raising questions about the validity of a report undertaken by the state’s Attorney-General.

Legal fees may be more heavily regulated nationally if NSW Attorney-General Bob Debus can enforce the recommendations of the NSW Legal Fees Panel Report, as discussed at the Standing Committee of Attorneys-General (SCAG) meeting last week.

In a Melbourne-based working party of all state and territory governments, the issue of how legal fees are charged was discussed as part of efforts to improve national model laws.

The NSW report, which follows a two-year inquiry commissioned by Debus, was prompted by comments made by NSW Chief Justice James Spigelman, who called for an end to the “tyranny of the billable hour” in early 2004.

While NSW is leading the charge, a spokesperson from Debus’s office said that a resolution from the other states is still five to six weeks away.

But the validity of the report has been called into question. President of the ACT Law Society, Greg Walker, said that “a lot of the conclusions are based on anecdotal evidence, and a number of the more extreme recommendations were not the product of a majority vote on the panel — they were a two-all split”.

Walker said that considering model law legislation has only just been introduced in most jurisdictions, the Report was premature, and at this stage, it is too early to speculate how states outside NSW will react to its findings.

Yet Alan McArthur, managing partner of Minter Ellison’s Sydney office, told Lawyers Weekly the Report’s recommendations were of little concern to top-tier firms.

“Frankly, most of the larger firms really don’t see a lot of what’s being said as applying at all to the sophisticated clients we act for,” he said.

The Report claimed that time-based billing “distances lawyers from any understanding of the real market value of their services”. But at the top end of town, the market regulates which firms win tenders, and how the corresponding fees are calculated. This means it is the clients who “hold the ability, in many cases, to determine what the price is that they’re actually prepared to pay”, said McArthur.

The natural force of the open market is such that Minter Ellison is not seeing a significant increase in hourly rates, even as costs are rising.

“Margins are under pressure, so lawyers have got to get more efficient in the way they deliver services — more focused investment in technology, more innovation. Most of us have got quite sophisticated models for looking at our profitability by matter and by client,” he said.

Importantly, it was often the clients themselves who requested time-based billing in the larger cases. According to McArthur, sophisticated in-house lawyers use time as a way of measuring whether they are getting the most efficient use of experts retained by Minter Ellison, sometimes checking the progress of a transaction on a daily basis.

The NSW Report advised that firms be required to provide cost estimates to clients and keep them notified of any changes to that estimate, to give quarterly updates, a final bill no later than six months after completion of a matter and be banned from charging interest.

If firms failed to properly estimate their costs, then they could be subjected to a 20 per cent cut of the fees to be received. But Walker said it “starts to get impossibly difficult to provide estimates that are absolutely accurate”, adding that most lawyers do their level best to review estimates and keep clients informed.

In the ACT, complaints over time-based billing are never addressed to the Law Society. “We deal with a number of complaints, and quite a few of them relate to costs, but none that I’m aware of specifically dealing with a complaint about time-based billing as opposed to other ways of billing,” Walker said.

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