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Scrap time-based billing:ALRC

Scrap time-based billing:ALRC

ECHOING the words of NSW’s most senior judge, the Australian Law Reform Commission (ALRC) has launched an attack on time-based billing for lawyers, saying that scrapping it would reduce…

ECHOING the words of NSW’s most senior judge, the Australian Law Reform Commission (ALRC) has launched an attack on time-based billing for lawyers, saying that scrapping it would reduce overcharging and stop rewards for lawyers who are inefficient.

In an interview with Lawyers Weekly, ALRC president Professor David Weisbrot said incompetency and inefficiency in the legal profession was being rewarded with the current method of time-based billing.

“If you are experienced in a particular field you know all the facts and you have a bank of precedents,” he said. “But if not, it would take time to develop these things,” said Weisbrot, suggesting this time would often be billed.

As lawyers became more expert, Weisbrot explained, they could do the same things in less time.

Acknowledging that the result in the end may be the same quality, Weisbrot said “the time-based billing method rewards people who cannot do things so quickly”.

The NSW Government announced last week there would be a review of the way lawyers charged their clients in this state, following more than 2,700 formal complaints about lawyers last year, a fifth of which related to overcharging.

During his opening of the law term address, Chief Justice James Spigelman called for an end to the “tyranny of the billable hour”.

Spigelman said it had occurred to him that time-based charging had become almost universal. “I do not believe this is sustainable,” he said. He also noted that the former NSW Law Society president Robert Benjamin had published in the Law Society Journal an article on the tyranny of the billable hour.

As well, Spigelman said that his own predecessor, Chief Justice Gleeson, had often said it was “difficult to justify a system in which inefficiency is rewarded with higher remuneration”.

The difficulty of course, said Spigelman, was that the lawyer providing the service “does not have a financial incentive to do the service as quickly as possible” and that the only control was the practitioner’s sense of professional responsibility.

ALRC’s Weisbrot concurred on this issue and said that if lawyers were passing their inefficiency onto their clients through their billing, “then they don’t have a case to speed up when the meter is running”. “There is no particular incentive for the lawyer,” he said.

ALRC had considered this issue in detail, according to Weisbrot. A four year comprehensive inquiry into the federal civil justice system culminated in the landmark report Managing Justice: A review of the federal civil justice system.

The report found that “lawyers’ charging practices were [among] the most significant influences in determining the amount of private costs”.

Another key finding in the report, Weisbrot said, was an empirical study which looked at many thousands of federal cases and “we found that family courts processes were very ineffective”. The report found that the courts were requiring clients to make many unnecessary appearances in court, he said.

“If a lawyer is made to do this then they may grumble, but there is no real stake for them to speed things. But if a lawyer had to subsidise such errors, then they would be looking for reform,” Weisbrot added.

When it became a “pocket issue” for lawyers, Weisbrot explained, it was a different matter altogether.

“Problems with overcharging can be reduced by moving from an hourly rate to event-based fees, with charges fixed in advance for work at particular stages of the process. Event-based scales would provide a greater certainty about costs for clients,” Weisbrot said.

“It just drives clients wild when they receive a bill inflated by costs for photocopying, phone calls and ‘perusing’ documents,” he added.

The Commission recommended that all states and territories enacted uniform legislation that required lawyers to provide estimates of costs to their clients. It added that legal professional associations should also develop an ethical requirement that indicated what would be regarded as a fair and reasonable fee.

During the preparation of the report, ALRC hired an economist and an econometrician to see if they could come up with events-based scales that might be able to be adopted. Initially, the figures appeared too low, Weisbrot said, “and therefore lawyers might baulk”. But when the figures were redone by an econometrician they looked better, according to the ALRC, and the Law Council at the time “seemed quite pleased with the result and were positive about the outcome”, though they did want to have a closer look at the figures.

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