Unconscionability and legal fee estimates, again

The law of unconscionable conduct has been rolled out again as a vehicle to adjust lawyers’ fees in the same way as they might be in a civil costs dispute under the Legal Profession Act, 2004, but in a case to which that Act’s regime did not apply. It has happened once before to my knowledge (see my previous post). In P&R v. Goodwin [2007] VCAT 1199, solicitors sued for their fees, but succeeded in obtaining an order only for the difference between the amount they estimated total legal fees to be at the start of the retainer, and the amount they had already been paid by the client. I do not think VCAT has jurisdiction in relation to disputes between lawyers and clients, because the jurisdiction is predicated on the engaging in of trade or commerce (VCAT has reserved on a test case in that regard). That aside, it is a relatively attractive forum in which to sue for fees. This decision may suggest that it is better to sue in a court, however, unless there is an unusual squeaky cleanliness in following the costs disclosure regime.

Because of the brevity of reasons which come out of tribunals, it is difficult to comment on them, but in a novel application of the law like this one, the uninvolved reader is left with some anxieties. The appearance is given, for example, that the mere fact that costs exceeded the original estimate was what founded the conclusion that there had been unconscionable conduct. Unconscionability is an equitable idea. The person who comes to equity must do so with clean hands. What if Mr Goodwin were a rich man, well used to retaining lawyers, who cunningly kept on retaining his lawyers after paying them $10,000, knowing their estimate to have been $11,000, and then said, when he had had the benefit of their services ‘Sucked in, friends, you’ve exceeded your estimate, and I’m only paying you a grand?’

What if he got a bill for $10,000 and then retained the lawyers at about the same rate of activity for the same period again? Ought he not to have realised he was up for about another $10,000, and dealt with the problem then? Mr Goodwin was a defendant. He had no choice about being involved in litigation. What would he have done differently if he had got an accurate estimate at the outset? Gone to cheaper lawyers? If so, his remedy should have been the difference between their likely fees and the fees he actually got charged, less something to reflect the proposition “Pay peanuts, get monkeys”. Represented himself? If so, the tribunal would have to be satisfied that he could have done so no less successfully in terms of the outcome of the case against him than he did in fact, and that proposition would have to be treated with a healthy scepticism, because presumably if he could have done so, he would not have been willing to shell out $11,000 to be represented in the first place.

The Legal Profession Act, 2004‘s costs provisions did not apply because instructions were first taken before 12 December 2005. The suit was for the balance owing for representing Goodwin in the defence of a County Court action. The Legal Practice Act, 1996‘s provisions which allow VCAT to reduce legal fees by reference to infractions of the costs disclosure regime apply only to costs disputes, and this was not a costs dispute. The bill was for more than the $15,000 limit of VCAT’s jurisdiction and the dispute had not been initiated by a costs dispute resolution request lodged with the Legal Services Commissioner or one of her predecessors. The estimate was about $11,000, and the total costs ended up being about $18,500. According to the reasons, that fact alone demonstrated that the solicitors had engaged in unconscionable conduct against their client. Perhaps there was more to it than that, but if so, it does not appear in the reasons. This is what they say:

‘It is … clear that [the] costs disclosures are inadequate in the light of the ultimate account for $18,550. There is a continuing obligation on legal practitioners to keep the client appraised of the progress of a matter in relation to that client’s liability for costs. That continuing obligation exists under both the Legal Practice Act, 1996 and the Legal Profession Act, 2004 and whilst this dispute is not brought under either of those Acts, the provision of the Acts requiring continuing disclosure continue to apply to legal practitioners in the conduct of their practice. …

7 The ultimate account which was rendered some three months later [than an estimate of about $11,000] is in the order of $7,000 greater than that estimate. The continuing by the [solicitors] to incur fees for the [client] in that amount without giving an adequate disclosure is in my view unconscionable conduct and therefore falls within the ambit of the Fair Trading Act 1999. The estimate … is a total of $11,305. The client … has paid to the [solicitors] $10,205. There is therefore a discrepancy of $1,100. In all the circumstances it is the order of the Tribunal that the [solicitors’] account be appropriately reduced in order that the sum of $1,100 is outstanding and I order that the [client] is to pay to the [solicitors] the sum of $1,100
forthwith in full satisfaction of the account rendered by [them].’

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