Legal billing - don't get a raw deal

When you need to see a solicitor, how do you know if you’ve been overcharged – and what can you do about it?
 
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01 .Balancing the bill

Please note: this information was current as of August 2009 but is still a useful guide to today's market.


In brief

  • Justice weighing lawyer an moneyYou can avoid getting overcharged for legal consultations, provided you know your rights.
  • If you think you have been overcharged, there are steps you can take before making a formal complaint.

When it comes to legal fees, consumers are still getting a raw deal. In the 2007-08 financial year, Victoria’s Legal Services Commissioner received 827 complaints of overcharging , while in South Australia almost 40% of cases at the state’s Legal Practitioners Conduct Board related to overbilling.

In the same period, complaints about legal costs comprised 23.5% of all written complaints received by the NSW Office of the Legal Services Commissioner (OLSC) . In one case, a lawyer charged $750 for typing a three-page document and $40 for receiving a message to return a phone call.

CHOICE outlines what you can do to minimise the risk of legal overcharging and the steps to take if you suspect you’ve been ripped off.

Preventative action

There are steps you can take to avoid being unfairly slogged with excessive legal fees and expenses

  • Beware the "free" visit
    Several law firms offer free first sessions, but this may only cover the first hour of your consultation – so make sure you find out how long the “free” visit lasts. Also check if you’ll be charged for any legal advice given. Most lawyers do not give written advice during the first free visit and may charge you a fee to do so as they can be sued for giving the wrong opinion based on a one-hour consultation.
  • Professional first, friend second
    Never assume you’ll be able to bag a bargain with a lawyer you know personally or who is recommended to you. Last year, CHOICE subscriber Russell engaged a lawyer acquaintance to handle his mother’s estate. Three months later, he received a bill for almost $8000, with a costs disclosure document he claims he’d never seen before nor been told about. He complained to the NSW OLSC, which is looking into the matter. Whoever you choose as your lawyer, formalise the arrangement before proceeding.
  • Know your rights
    Getting things right at the beginning will save you time and money. Consumers often don’t know it is their right to ask a lawyer at the outset for a costs agreement - a document summarising and itemising the lawyer’s work. “Consumers should be more proactive when engaging lawyers because they are the ones paying, and lawyers are merely agents with legal knowledge who advise and act on the client’s instructions,” says former NSW Supreme Court costs assessor Paul Garde, a lawyer with 30 years’ industry experience.
  • Is it defendable?
    The consumer should first establish whether their claim is worth defending. “Solicitors should tell their clients, either at the outset or as the case progresses, whether the case is winnable, risky or a maybe,” says Garde. The lawyer’s job is to explain this in simple terms.
  • Check costs
    When you later receive an itemised bill, it should reflect the costs to which you’ve agreed. You also have the right to be notified of any changes in your case, such as court developments, and how they will affect costs. Under most states’ Legal Profession Acts, before being retained by the client lawyers are legally obliged to disclose costs such as their hourly rate and the cost of expenses such as photocopying documents. Not doing so can amount to professional misconduct, and several lawyers have been taken to task by relevant state legal bodies.

    Garde says consumers’ lack of awareness of their rights resulted in a substantial number of the overcharging cases he saw as a costs assessor. “What’s most astonishing is that a surprising number of lawyers still do not do any costs disclosure whatsoever, even though they are legally obliged to do so.” This information gap, coupled with the fact that most clients are generally in a state of distress when a lawyer is needed, may explain why some shoddy disclosure practices still occur.



Illustrations by Michel Streich

 
 

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What is the basis of legal costs and expenses?

Different jurisdictions across Australia have different methods of calculating costs. The most common scenario is that the consumer pays all legal fees and expenses regardless of the outcome. But under a conditional costs agreement (no win, no fees), you pay only if your case is successful. Be sure to ask what a “successful outcome” means in such an agreement, how much you may have pay in fees from your award when you win, and how much in legal expenses, such as photocopying bills, you may also have to pay.

Will the costs be time- or scale-based?

Time-based costs are charged on an hourly rate, while scale-based costing relies on each state court’s scale – a standard list of charges for various legal expenses and tasks performed by a solicitor. In NSW, for example, probate (deceased estate) and family law matters are based on a scale of costs set out by the courts.

How and when will you be billed?

You can ask for a bill itemising how often you will be charged, any interest that may be charged on overdue bills and whether this rate is fixed or variable. What are the estimated total legal costs and expenses? You can ask for an explanation of the possible major events that may escalate costs, such as a counterclaim by the other party or new evidence.

Who else will be involved in your case?

Fees may multiply as more legal professionals become involved, such as additional junior or senior solicitors or barristers. However, if your case looks like it might end up in court, it may be worthwhile consulting a barrister as soon as possible through your solicitor.

Victorian barrister Maryanne Loughnan SC says that because barristers are constantly in court they are able to advise clients on the likely outcomes should a dispute go to court. Along with the solicitor, they can also provide a rough estimate of the costs of a full court case. Ask if your case is to be handled solely by your solicitor and, if not, how much you’ll be charged if a barrister is engaged. This will enable you to decide whether or not you wish to get involved in a court case.

If you believe you’ve been overcharged by your lawyer or law firm, first check that you have a costs agreement and itemised bill. These documents will help you work out which items are in dispute. In Victoria, NSW and Queensland, lawyers are legally obliged to give you an itemised bill within 28 days of being asked.

Talk to your lawyer

This could be the most cost-effective solution when you think you have been overcharged — but be aware of your rights. CHOICE subscriber Anastasia, who was upset with her lawyers for failing to prepare a response to the court on a child custody dispute with her ex-husband, wanted to terminate her relationship with the law firm. She asked for her bill, which came to a lump sum of $2500. “I then asked for an itemised bill so I could understand the high cost,” she says. “Instead, I received a letter from the firm offering an $800 discount only if I did not request an itemised bill.” Disillusioned, she paid the $1700 and represented herself in court.

Costs mediation

Mediation is generally quicker and cheaper than costs assessment in court. In most states, legal bodies provide free mediation where you and the lawyer come together with an independent mediator. Most mediators cannot give legal advice or decide whether the costs are fair or reasonable, but being independent facilitators, they may be able to help both parties come to an agreement.

Make a formal complaint

Every state has a body that handles consumer complaints about legal services and lawyers (see Contacts). Generally, the cost dispute will be looked into and may be referred to another legal body, where a disciplinary inquiry against the lawyer may be initiated. There is also a time limit — usually between 30 and 60 days — to make a complaint. The processes and costs for seeking redress vary with each jurisdiction (see Different states, different rules).

CHOICE reader experiences

"My ex-husband and I drew up a simple agreement in relation to the division of our assets that should only have cost $600, but ended up costing me $1800. My lawyer insisted she needed extra information to draw up the agreement. In the end, she drew up one that looked exactly like the one I gave her, yet the costs trebled from all the emailing and telephoning for which she happily charged me.

"When I confronted her, she said she would not give me the document until I paid the full amount. I had to pay in the end as I needed this legal agreement to avoid paying stamp duty on the house.” 

— Lara, NSW

“In 2006, my neighbour made a claim against me for negligence in not repairing a faulty fence in a timely manner. He had scaffolding put up and made a $54,000 claim against me – $14,000 for the cost of the scaffolding and professional expenses and $40,000 for his estimated legal fees. As part of my defence, my lawyers advised me to cross-claim against my builder who was to blame for not repairing the fence when instructed. They estimated that the legal cost of defending the case would be between $20,000 and $40,000, most of which could be passed on to my builder if I was successful in establishing the cross claim.

"After the first hearing, my legal costs more than trebled to about $150,000. My lawyers said this was partly because of the delaying tactics of my neighbour. As I no longer trusted their advice and felt I had been overcharged, I dismissed them and had their costs assessed. As a result, $15,000 was discounted from the bill, most of which I've settled. I have now appointed new lawyers and have spent between $30,000 and $40,000 fighting two cases – one against the neighbour's claim and the other against my previous lawyers." 

— Michael, NSW

Different states, different rules

Legal billing grievances are dealt with differently in each state. There are 55 bodies that regulate the legal profession across all the state jurisdictions. However, there are moves to reform the system to bring it under a national regulator. The reforms include uniform rules on lawyers’ trust accounts and costs disclosure, fines for any breaches of provisions adopted and a new regulation under which the principals of law firms — not their solicitors or any other person — would approve bills. The new legislation is expected to be drafted before May 2010.

In the meantime, the following procedures apply in NSW, SA and Victoria.

  • In NSW, when consumers make a complaint to the Office of the Legal Services Commissioner, they are recommended for mediation or referred to the NSW Supreme Court for a costs assessor to review and decide upon a fair and reasonable amount of costs for the services provided. There is an application fee of either $100 or 1% of the amount of costs remaining unpaid or in dispute at the time of making the application, whichever is the greater.
  • In SA, the Legal Practitioners Conduct Board investigates complaints at no cost to the complainant and has the power to refer gross overcharging to the SA Supreme Court and take disciplinary action against the lawyer. Last financial year, nearly half of all advisory letters the board sent to legal practitioners related to lawyers’ conduct on costs to their clients.
  • In Victoria, no application fees are involved but complainants must deposit the amount of disputed and unpaid legal fees into an interest-bearing bank account held by the Legal Services Commissioner before it will deal with the complaint. The deposit may be reduced or waived if it causes undue hardship.

For more information about the complaint process and the fees in your state, see the contacts below.

Contacts

AUSTRALIA-WIDE Community Legal Centres (CLCs) are independent, non-profit organisations that provide free legal services to the public. To find a CLC in your state, go to www.naclc.org.au
ACT ACT Law Society www.lawsocact.asn.au
NSW Office of the Legal Services Commissioner www.lawlink.nsw.gov.au/olsc
NT Law Society Northern Territory www.lawsocietynt.asn.au
Queensland Legal Services Commission www.lsc.qld.gov.au
SA Legal Practitioners Conduct Board www.legalcomplaints.com.au
Tasmania Law Society of Tasmania www.taslawsociety.asn.au
Victoria Victorian Civil and Administrative Tribunal www.vcat.vic.gov.au or Legal Services Commissioner (Victoria) www.lsc.vic.gov.au
WA Legal Practice Board of WA www.lpbwa.org.au

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