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Pakula, Jennie --- "Ten things I hate about you: How to avoid costs complaints" [2014] PrecedentAULA 37; (2014) 123 Precedent 40


Ten things I hate about you: How to avoid costs complaints

By Jennie Pakula

If you ask any of the state legal service regulators what most complaints are about, the answer is likely to be ‘costs’.

A former client approaches the regulator wanting their lawyer’s bill reduced – but unpack that complaint and there are many common issues and emotions that culminate in the client thinking that they have not received good value for money. In nearly every case, the reasons behind the dispute raise common themes of getting a nasty surprise when the bill arrives, poor communication, poor service, unmet expectations and misunderstanding about what a lawyer does.

Few costs disputes result in serious disciplinary action, but dealing with a complaint can be time-consuming and leave a sour taste in your mouth. Although much can be resolved by hearing the client’s concerns and settling on a sensible and commercial basis, it’s better to avoid getting the complaint in the first place. To help you with this, here are 10 common complaints about costs received at the office of the Legal Services Commissioner of Victoria, and some suggestions about how they might be avoided.

1. ‘He assured me the total cost would be $10,000, but my bill is $22,000! I never would have gone ahead if I’d known it would be so costly!’

Behind a statement like this is a client who feels ripped off and no longer trusts their lawyer. Such a client feels they weren’t given a clear idea at the beginning about how much the matter would really cost nor about mounting costs. The client feels they didn’t get the opportunity to cut their losses and now they feel stupid to have gone ahead only to achieve what feels like a pyrrhic victory. A client like this is not going to give their lawyer a glowing testimonial.

At the beginning of a matter, lawyers are required to give an estimate of the total amount of costs payable in the matter, and the basis on which costs will be charged.[1] While it is often very difficult to give an accurate estimate, it is important to put some time and thought into how you come up with a figure to ensure that it is within the ball park.[2] We sometimes see estimates of ‘between $2000 and $20,000’ for an entire matter, which are so vague as to be almost useless. Another relatively common mistake is to underquote which, again, does no-one any good as the client frequently feels deceived. It’s important not to skate over this requirement, as we have seen many cases where a vague or poorly calibrated estimate is the seed of a later complaint.

It is far better and more informative to give costs estimates that are based on stages in the matter. Setting out the stages in a matter in the costs agreement or disclosure document also helps the client to understand the legal process involved and the amount of work to be done.

If the basis on which you gave the initial estimate changes, you need to work out how much this is likely to increase the bill and let the client know in writing.[3] You don’t need to do a whole new costs disclosure, but you do need to say what the new estimate is and why.

Your client wants to know whether the cost is going to be worth it in view of the possible outcome. This means the potential final cost has to be a regular topic of discussion, and you need to have a number of options available for the client to consider at each stage. The outcome the client is expecting also needs to be regularly discussed, particularly if they came to you with a desired outcome that looks increasingly unrealistic. Clients need to be kept up to date with developments and consequent work in progress, and given opportunities to decide whether they are going to cut their losses and settle or bat on. It is important for your own protection that you keep file notes of such conversations. Warn them also if their level of communication (for example, long, regular emails and phone calls) is likely to increase the costs.

Consider also whether fixed fee arrangements would work better for you and your client. The best of these agreements are marked by their clarity, spelling out the scope of what is to be done and how much the costs will be at each stage. While no billing arrangement is ‘complaint proof’, the fixed costs agreement removes one source of uncertainty in the threatening landscape of litigation.[4]

2. ‘She strung out the work doing lots of unnecessary things to maximise the bill.’

Here, the client no longer regards the lawyer as a trusted adviser trying to make things right; instead, for the client, the lawyer has fallen into the all too familiar stereotype of the shyster trying to profit from the misfortune of another. Don’t underestimate the power of these stereotypes – you would be surprised how many times they turn up in the narrative of a client’s complaint. When the client starts to see you in this way, they also lose sight of the fact that you are a human being, trying to do a reasonable job for them, and in the more extreme cases, the client attributes very bad motives to everything the lawyer does.

Again, communication is key – explain why you need to do particular tasks and how they contribute to the overall aim of what you are doing for the client. If the task blows out, it’s wise to reduce the charge if you see that it’s starting to get disproportional.[5] This kind of complaint also highlights the problems with time costing; the client may suspect you of putting in more hours than you should.

Of course, there are more serious cases where this accusation is borne out. Recently, a Victorian lawyer was found guilty of professional misconduct for charging a client for 240 hours of legal research in an otherwise unremarkable personal injury matter (further increased by a 65 per cent loading for care and skill and a 25 per cent uplift).[6]

3. ‘She charged a full unit for every tiny attendance, even reading a two line email!’

One example of this complaint was a lawyer who charged one unit for reading an email from her secretary to say the client had called, then another for reading a two-line email from the client on the same issue – not surprising that the client was somewhat incensed to see this on the bill! The rule of thumb here is that overall costs need to be fair and reasonable as to the work done and the manner in which it was carried out.[7] It is appropriate to group related attendances and the overall charge should reflect the amount of time spent.[8]

It is not a defence to say that the costs agreement allows you to do this – if the operation of the agreement is not generally fair and reasonable, you run the risk of having it set aside under either your local jurisdictional legislation or the Australian Consumer Law.[9]

4. ‘The lawyer told me I would only have to pay if I was successful – but all I got was what the other side offered me in the first place!’

This statement brings us into the fraught area of the ‘no-win, no-fee’ agreement. Definitions of ‘success’ in such agreements need to be drafted carefully and reasonably. In one complaint, ‘success’ included obtaining a judgment against the client’s opponent who, in the particular complaint was so impoverished that the judgment was not worth obtaining or enforcing. Further, the client had no idea at the beginning of the matter that obtaining a judgment was only as good as its enforceability.

In order to avoid complaints, be sure that you are not setting yourself up to charge significant costs for what is effectively a pyrrhic victory for the client. Communication with the client about what they can expect, how much it will cost and what risk they, and you, are carrying in the matter will help them to make a wise decision about whether to proceed or not.

5. ‘They told me the case was bad at the mediation. But before that, they said it was a good case. I had to settle and the costs were so high that I only got 10 per cent of the settlement amount.’

This statement reflects the complex balance between expectations, risks and the client’s cost/benefit analysis. The client received two nasty surprises here: the first due to not understanding the risks involved in litigation (that is, that the other side might put a case that has a strong likelihood of success), and the second due to having come so far only to achieve a very small net result. Meanwhile they perceive that the lawyer has made quite a healthy profit out of it.

Before advising a client to settle, speak to them about the costs to come out of the settlement.[10] It is important to keep costs and likely settlement prospects under discussion throughout the process, particularly where there is a strong likelihood that the client would face significant problems should the matter go to trial. Also, managing expectations and assessing the risks of proceeding should be a topic under regular discussion, particularly in light of further information and evidence presented by the other party from time to time. Clients should not go into mediation expecting no surprises and no compromises based on what emerges during the process.

6. ‘I asked for an itemised bill because I didn’t think the lump sum bill was justified – but it came out even higher!’

Many complainants express anger at what they see as punishment for daring to question a bill.

It is generally not appropriate to substitute a higher itemised bill for a lump sum bill. Based on previous case law,[11] the office of the Legal Services Commissioner of Victoria is inclined to take the view that a bill of costs cannot be altered after it has been delivered to a client unless:

• the client consents;

• the Supreme Court grants leave;

• the lump sum bill and the itemised bill are under costs review by the Associate Judge of the Costs Court; or

• the bill has a lawful condition of alteration which was fully and clearly stated to the client.

On the other hand, if a lawyer uses an itemised bill to show the level of service provided but only asks for the lesser amount of the lump sum bill, the client’s concerns might be allayed.

7. ‘I felt like my matter was not given any special attention, so why is he charging 25 per cent for extra care? And what are all these uplifts in the bill?’

An uplift fee can be a particular problem. To start with, if you are planning to charge an uplift fee, you need to disclose at the beginning of the matter why the uplift is warranted and on what basis it would be charged.[12] While the maximum uplift that can be applied is 25 per cent, the full amount will not be warranted unless the matter is particularly difficult or novel.

Sometimes we see bills that have been prepared by a costs consultant that seem very high for the work done and could amount to gross overcharging. The lawyer, when confronted with this view, will seek to pass on the responsibility to the costs consultant. While there are many good costs consultants out there, they don’t always get it right. The lawyer bears the responsibility for possible overcharging because they present the bill to the client and have to satisfy themselves that the charge is appropriate.

8. ‘The lawyer didn’t return my calls on time and I had no idea what was going on.’

Most people who complain about their legal expenses are inexperienced in legal matters and find the whole process extremely stressful. The legal system is a threatening and unfamiliar environment to them, and they want to understand what is going on. If they can’t get hold of their lawyer and get a clear explanation, they will perceive the lawyer’s service as poor value for money.

Of course, there are some clients whose anxiety will lead them to call frequently and seek to discuss the issues with you at great length. This problem can be prevented by ensuring to the best of your ability that the client understands how the matter will run (stages, timing etc), what can go wrong and cause delays, and a costs/benefit analysis of going on or settling at different times. Some lawyers use a flow chart setting out stages in a matter together with possible timings. This seems an excellent tool.

Many lawyers also set some ground rules as to how frequently they will need to communicate and what about. This is particularly important with an anxious client. For example, you might write a brief report to a client and tell them you will not need to be in contact until a particular stage is reached, so they should not be concerned if they have not heard from you for some time. A brief written report at certain landmarks within the matter is also an important way to manage a client’s expectations and keep them informed, especially where the matter is lengthy and complex.

9. ‘The lawyer made lots of mistakes in drafting my affidavit and I had to spend so much time correcting them. I don’t see why I have to pay for so many redrafts’

Clients do not appreciate sloppy mistakes and it does no good for your reputation as a lawyer or their trust in your professionalism. Be careful to try to get it right the first time; if you aren’t sure of the details, ask the client to fill in the blanks rather than making a guess, and work with the client so that they understand what they are correcting. Multiple drafts of affidavits are a frequent cause of complaint, particularly where the client is charged for all the time spent making the corrections.

10. ‘She didn’t call the witnesses I wanted, and she didn’t raise all the issues I wanted put to the Court. No wonder I lost. Why should I pay anything?’

Clients frequently don’t understand that a lawyer cannot simply be their mouthpiece, and that the service a lawyer provides is to give advice (whether the client likes it or not) and to run the matter in the most effective and efficient way in the client’s best interests.[13] It’s important to have a discussion with the client at the beginning, explaining what your role is and what input the client has in making decisions about how a matter is to be run.

Clients often don’t understand that a matter of immense personal significance for them can have no relevance whatsoever to their litigation. While a discussion of this kind can take some time, it is very important to make sure the client understands what you are doing and why. We frequently see complex complaints where the lawyer would have saved themselves a lot of trouble by ending the professional relationship much earlier – some clients unfortunately do not want to hear anything that contradicts their view of their matter and need to be handled with great care.[14]

CONCLUSION

Most complaints can be avoided by paying attention to a few important areas, particularly at the inception of the matter: clear communication about costing is a must, as is detailing how the matter will run, explaining the nature of your role for the client, and keeping them informed about options at each stage of the matter.

It is important, for both professional and commercial reasons, for lawyers to strive for excellent client service. This is perhaps the most important investment you can make. The practice division of the Law Council of Australia has produced some very useful guides for good practice in different areas of law to help lawyers make that investment in their practice. Victorian lawyers can also access information from the Legal Practitioners’ Liability Committee and the Law Institute of Victoria, while lawyers in other states can consult resources provided by their local professional associations and insurers. [15]

A high quality of service can only help to reduce the risk of client complaints. Of course, mistakes will occasionally be made and communications may falter, but if you have built a strong relationship with your client and things do go wrong, the client just may be more inclined to forgive than complain.

Dealing with costs complaints made to your local regulator

• Currently, each state has its own legislative scheme and approach to dealing with complaints about lawyers. However, there are some common features in how most of the regulators deal with costs complaints.

• A distinction is made between ‘consumer’ type matters, where a client for various reasons is unhappy with the bill and wants is reduced, and matters that may involve possible disciplinary action. The latter category includes gross overcharging, failure to give appropriate costs disclosure, failure to update costs estimates and so on.

• Many state regulators adopt an informal resolution process to resolve cost disputes. The Victorian Commissioner adopted a ‘rapid resolution team’ process in early 2010. Attempts are made to resolve cost and consumer disputes using an informal ADR based process to help the parties reach agreement, in the process of which the consumer concerns are discussed with the lawyer. This approach is also followed in other jurisdictions with considerable success.

• The vast majority of consumer disputes do not raise any issues that could result in disciplinary action. The aim of the regulators in such matters is simply to resolve the dispute, although in the course of such resolution some feedback about service related issues may be provided to the lawyer. A pragmatic and sensible approach is best adopted.

• Bear in mind that clients also have rights under the Australian Consumer Law in each jurisdiction. These rights are parallel to any rights under local laws regulating the legal profession. The Queensland Legal Services Commission has a useful guide on the application of such laws to disputes about billing.[16]

New Regulatory Scheme – NSW & Victoria

• In NSW and Victoria, the Legal Profession Uniform Law (‘LPUL’) is likely to come into operation within the next 12 months. The legislation provides for a uniform scheme that will be adopted in Victoria and NSW under the oversight of a Legal Services Council and a Commissioner for Uniform Legal Services Regulation (‘CULSR’) based in Sydney. Each scheme continues to be administered by the local regulator – in Victoria, the Victorian Legal Services Board and the Victorian Legal Services Commissioner (with some functions delegated to the LIV and VicBar); and, in NSW, the Office of the Legal Services Commissioner, the Law Society and the Bar Association (the ‘Designated Local Regulatory Authorities’ – ‘DLRA’). The CULSR and Legal Services Council will harmonise the scheme through issuing guidelines, performing a co-ordinating role and making rules.

• Complaints are categorised into disciplinary matters and consumer matters.

• As in the current legislation in both states, disciplinary matters are allegations that would, if proved, amount to unsatisfactory professional conduct or professional misconduct.

• Consumer matters are defined somewhat circularly as issues that the DLRA believes should be resolved by exercise of the functions related to consumer matters.

• Consumer matters within the DLRA’s jurisdiction include costs disputes where the bills in question are no more than six months old and the total costs are less than $100,000 (or more, but only where the amount in dispute is less than $10,000).

• In dealing with consumer matters, the DLRA first attempts to resolve them informally, by discussion with the parties. If this fails, mediation may be ordered, and the DLRA may make binding determinations if appropriate. Determinations may be made as to:

o Costs payable where the amount in dispute is less than $10,000;

o Work to be redone;

o Bills to be waived or reduced;

o Apologies;

o Compensation orders;

o Cautions; and

o Supervision, training, education or counselling to be undertaken by the legal practitioner.

• Costs matters can also be referred for costs assessment (in Victoria, by the Supreme Court) or, where the costs do not exceed $25,000, for determination under local legislation (in Victoria, by VCAT).

Jennie Pakula is Manager, Assessments and Resolutions at the Victorian Legal Services Commissioner. EMAIL jpakula@lsc.vic.gov.au


[1] Section 3.4.9 Legal Profession Act 2004 (Vic) (VLPA); s 174(1)(a) Legal Profession Uniform Law 2014 (Vic) (LPUL).

[2] In Victoria, the Legal Practitioners’ Liability Committee (LPLC) has run a number of well-received workshops on how to arrive at an accurate costs estimate. Your state insurer or regulator may also have useful information or training available.

[3] Section 3.4.16 VLPA; s174(1)(b) LPUL.

[4] The Queensland Legal Services Commission has recently produced a very helpful regulatory guide on Fixed Fee Costs Agreements. See <www.lsc.qld.gov.au/publications/regulatory-guides>.

[5] Section 172(1) of the LPUL provides that costs must be ‘no more than fair and reasonable in all the circumstances and... (a) proportionately and reasonably incurred; and (b) proportionate and reasonable in amount’. Further, s173 provides that a law practice must avoid acting in a way that unnecessarily increases costs.

[6] Legal Services Commissioner v Bektas [2013] VCAT 2142.

[7] Section 3.4.44, VLPA; s172, LPUL.

[8] See p13, Legal Services Commission (Qld), Regulatory Guide 8 – Billing Practices: Key Principles (2013), <www.lsc.qld.gov.au/publications/regulatory-guides >.

[9] Section 3.4.32 VLPA enables the Tribunal to set aside a costs agreement that is not fair and reasonable; s185, LPUL may apply to make such an agreement void.

[10] VLPA, s3.4.13; LPUL, s177

[11] Re Thompson (1885) 30 Ch.D. 441; Re Edwin Sutherland & Co’s Bills of Costs (1971) Qd.R. 318; and Redfern v Mineral Engineers Pty Ltd [1987] VicRp 47; [1987] VR 518.

[12] VLPA, s3.4.14 & s3.4.28; LPUL, s182.

[13] Rule 17, Professional Conduct and Practice Rules 2013 (NSW); Rule 13, Professional Conduct & Practice Rules 2005 (Vic).

[14] Research indicates that an increasing number of people in the community have what is referred to as a ‘high conflict personality’, and many of them go on to make complaints about their lawyers. For help in dealing with such clients, see High Conflict People in Legal Disputes by Bill Eddy (2008, HCI Press, San Diego) and <www.highconflictinstitute.com>.

[15] See websites for the Law Council of Australia <www.lawcouncil.asn.au>, the Legal Practitioners’ Liability Committee <www.lplc.com.au> and Law Institute of Victoria <www.liv.asn.au>.

[16] Regulatory Guide 7: The Application of the Australian Consumer Law to Lawyers (2013). See <www.lsc.qld.gov.au/publications/regulatory-guides>.


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