Legal Practictioners Conduct Board

Cost issues are still the most significant cause of complaint to the Legal Practitioners Conduct Board.

Approximately 25% of the Board's written complaints include complaints about costs.

Many cost complaints could be avoided by adequate information being given to a client about costs at the time of the first interview and as circumstances change during the course of a matter. Professional Conduct Rules 41 & 42 set out the obligations relating to costs.

What are common types of cost complaints?

Client not informed about the basis of charging by the legal practitioner or about how much their matter would cost. Often there maybe one or two personal attendances and the bill is not large. Disputes arise because there is no cost agreement and there has been no discussion or inadequate discussion about the basis of charging.

Many of these complaints could be avoided if the attendance and other rates were made known to the client at the time of the initial telephone call or contact with the firm. It may not be possible at the outset to estimate the actual cost of an initial attendance or preliminary work but the charge out rates could be advised and the consumer would be fully aware of the rate of charge.

Many in the community do not know what are the usual or common charges of legal practitioners. Many clients are shocked at the account and complain to the Board expressing the view that they have been unfairly charged. This may not be the case at all but clear communication at the outset would not only avoid the complaint to the Conduct Board, but would avoid a disgruntled client and limit any potential damage to the standing of the professional as a whole
Cost estimate given but no review of the cost situation as the matter progresses. This is a requirement under the Conduct Rules. On occasion problems have arisen when ultimately the costs charged greatly exceed the estimate and the client is unaware that the cost situation has altered from the original estimate.
Charging overscale without a written agreement.

Counsel fees included in an account when a client was unaware that a lawyer intended to refer the matter to a barrister for opinion or where the solicitor instructed in the matter is unable to attend a Court appearance and briefs another practitioner to appear but the client is not advised of the initial solicitor's unavailability.
Terms used on accounts that are not explained to the client eg disbursements or the account is lacking sufficient detail to enable the client to see what work has been done for them.
Offer of free first interview - this is a cause of a significant number of complaints because there is a lack of clarity as to the exact nature of the offer and any conditions that may apply, eg limited to the first half an hour.

Some issues in relation to cost agreements are as follows:

Lack of clarity of wording of costs agreement. Costs agreements should be written in plain English. Some agreements are difficult to read and are not easily understood by clients. On occasions agreements appear to authorise a combination of hourly rate and fixed fee. The basis of the charges is unclear.
Lack of explanation of time "unit" - if time based charging is the basis of the costs agreement then an explanation should be given about what constitutes a "unit" of time. The concept of such "units" of charging can be confusing for the uninitiated.
Lack of explanation of scale plus uplift - if a particular scale is used as a basis for a cost agreement together with an uplift then there needs to be some articulation of what the scale is so that this is clear to the client.

Litigious matters

A number of matters dealt with by the Conduct Board have arisen because the costs charged in a litigious matter have varied significantly from the estimate given to the client at the time of settlement. The client settled on the basis of receiving a certain net sum but then discovered that they have incurred legal fees which in some instances, have amounted to thousands of dollars more than the estimate given. This has resulted in dissatisfaction and a complaint to the Board. Accurate cost estimates at this time would alleviate such complaints. In addition practitioners are under an obligation to comply with Rule 41.2(d) of the Rules of Professional Conduct and Practice.

Some issues have been raised in relation to contingency fee agreements as follows:

Misunderstanding or lack of articulation, as to the terms of the "no win - no fee" agreement may lead to complaints about costs.
Lack of definition of what constitutes "a win" often leads to a debate as to the client's liability for costs when there has been a settlement or in other circumstances not covered by the agreement.
Lack of clarity in relation to the liability of the client to pay disbursements can also lead to difficulty. In some matters seen by the Board the client believes they are not liable for any costs at all, but the solicitor is of the view that disbursements should be paid by the client. The dispute has arisen because of the lack of clarity of this issue.
Termination of a Retainer - The agreement should deal with the situation where there is a termination of retainer by the client prior to the conclusion of a matter and should cover the circumstances in which a bill will be rendered by the practitioner. In some situations a client has disputed liability for costs until the matter is concluded but the issue could have been avoided if the possibility was canvassed in the fee agreement.

Investigation by the Board of costs complaints

On occasions these matters are referred to conciliation. On other occasions files may be referred to an independent cost assessor who will provide an opinion to the Board. Refer to Information Sheet No. 8. (PDF 536Kb)

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The Board's power in relation to costs

The Board is of the view that Section 77A does not permit it to enquire into disputes in relation to party/party costs. Its powers are set out in Section 77A and include a power to make a recommendation in relation to the issue of costs. It does not perform a taxation role and cannot order a practitioner to do anything in relation to costs. Nevertheless conduct issues can arise in relation to costs issues and the Board would still ascertain whether there is misconduct eg due to non-compliance with the Rules of Professional Conduct and Practice or if overcharging amounts to gross overcharging it can, of itself, amount to misconduct.

Recent Magistrates Court Decision

A decision was delivered on 19 September 2003 by the Deputy Chief Magistrate, Dr A J Cannon. He had considered a matter where a solicitor was claiming costs for legal services from a client. Whilst in that matter judgment was entered for the solicitor, His Honour made some pertinent remarks about solicitors' obligations in relation to the Conduct Rules. In the decision he stated "I am concerned that the practitioner appears to have breached the Professional Conduct Rules by not providing a written note about the calculating of costs at the outset of the proceedings. I note that several cases recently have come to my attention where a practitioner has not given a written advice about costs to their client".

Further His Honour considered the status of the Professional Conduct Rules that were then in force in relation to costs and made the following remark, "Absent any agreement to the contrary I find that the Professional Conduct Rules are implied into the contract between a lawyer and her or his client".

Practitioners should particularly note his final comment which is "although there was no consequence from the breach of the Professional Conduct Rules in this case, there will be many cases where a client has been disadvantaged by a failure of a lawyer to give proper advice about the costs of the retainer at the outset of the retainer. A failure to comply with the Professional Conduct Rules may prevent the lawyer from recovering costs in some cases."

Rule 42 of the Rules of Professional Conduct and Practice - costs agreements

Relates to contingency fee agreements and also deals with criteria which will be considered in assessing whether the fees or terms of any costs agreement are unfair or unreasonable.