VCAT cancels bill and leaves solicitor wholly unremunerated for sloppy work

Praag v W & T Lawyers [2008] VCAT 307 was a rare thing: a case in VCAT’s Legal Practice List actually prosecuted pursuant to the Legal Profession Act, 2004. Mr Praag was his late mother’s executor. Before her death, she lived in Canberra. Her assets were a house in Canberra and $50,000 cash. Mr Praag went to the respondent solicitors who said they would get probate of the will for $2,800. The scale cost for doing so was $499. They did not otherwise comply with the costs disclosure regime in the Legal Profession Act, 2004. In fact it was unnecessary to get probate in Victoria, and it would have been better to have got it in the ACT. Though Mr Praag was able to withdraw the cash from the Bank with the Victorian parchment, he was unable to deal with the house unless he resealed the probate in ACT, which cost a bit extra on top of the cost of getting probate. Member Butcher mentioned several ‘concerns’ he had before concluding: Continue reading “VCAT cancels bill and leaves solicitor wholly unremunerated for sloppy work”

WARNING: costs agreements and bills require amendment

Since 6 December 2007, the maximum interest chargeable on bills has dropped from 12% (the penalty interest rate) to the Reserve Bank Target Rate +2% (at the time of writing 8.75%), and the period of non-payment after which you can begin charging has changed too. You need to amend your bills because if you don’t put the right statement on them, you won’t be able to recover interest unless you dream up some sophisticated arguments. In the case of ongoing retainers, you probably need to send the first new bill of the new regime under cover of a letter advising a change in the rate applicable to unpaid bills. Otherwise, you might fall foul of the ongoing obligation to disclose any substantial changes to anything previously disclosed.

You do not have to express the interest chargeable as a percentage rate per annum. In my experience, the only time anyone ever charges interest is when suing for fees, after the relationship has broken down, or demanding payment of fees as a condition of staying on the record or giving up a file subject to a lien. Perhaps that was because the rate was so punitively high, and perhaps because too few people knew about the penalty interest rate calculator on the internet. Why not set a lower rate which is dead easy to calculate and actually make a habit of collecting interest? So long as the rate you are effectively charging works out lower than what you would charge if you charged the maximum annual percentage rate over the same period, you’ll be sweet. Read on to find out the answer to the questions someone in your firm is sure to ponder at some stage in the future: does it apply to bills given before 8 November 2007? Does it apply in retainers in which instructions were first taken before that date?

Continue reading “WARNING: costs agreements and bills require amendment”

Sudden eruption of unconscionability amongst solicitors further documented

Updated, 4 January 2008: See the underlined additions below (with thanks for the references to Jason Pizer’s book at p. 246).

Original post: Now two unrepresented folk have managed to convince VCAT’s Legal Practice List’s Member Butcher in a Fair Trading Act, 1999 claim that yet another solicitor has been acting unconscionably towards his clients in relation to fees. The decision in Alexander v HWL [2007] VCAT 2297 (and two earlier decisions posted about here and here and here) suggests two separate schisms between VCAT’s decision makers:

  • The first between those who hold that solicitors engage in trade or commerce when they provide professional services to clients (such as Member Butcher) and those who hold that they do not (such as Senior Member Howell and Deputy President Steel); and

Solicitor gets away with fees of $83,000 after estimating at $2,500 and never updating

Ok, ok, that’s a bit of an exaggeration, but the solicitor did put out a costs agreement and fee disclosure document which contained no estimate other than $2,500, and did charge $111,000, which was reduced on an assessment — a NSW privatised version of taxation — and did not provide any re-estimates before putting out the first bill for $88,000. Savings Factory Pty Ltd v Daniel [2007] NSWSC 1343 is a useful case to illustrate that failure to comply with costs disclosure regimes is not the end of the world for lawyers. You just have to get the costs taxed at your expense.  Justice Palmer held that the estimate was just an estimate, and was confined to one part of the work which was to be the subject of the retainer (no estimates were provided in respect of the other work).  Here, the client maintained the solicitor’s retainer long after receiving the initial bill.

The case also illustrates another principle which you would think lawyers would get fairly readily, but which, sadly, we don’t.  It is that you can’t just put your rates up whenever you feel like it.  One reason why about 20% was taxed off the bills was that the lawyer’s rates were allowed only at the rate originally provided for under the costs agreement.

Ways for lawyers to cope with costs disclosure defaults

Under Victoria’s Legal Profession Act, 2004 the most apparently draconian consequences follow for the slightest non-compliance with any of the elaborate pre-retainer disclosures required to be made by solicitors. Under s. 3.4.17, if the lawyer has not disclosed something required by the relevant bit of the Act to be disclosed:

  • the client ‘need not pay the legal costs until they have’ been taxed as between solicitor-client in the Supreme Court, generally at the solicitor’s expense;
  • the solicitor ‘may not maintain proceedings … for the recovery of legal costs’ until the end of such a taxation; and
  • the client ‘may apply … to set the costs agreement aside’.

In Dennis v Cameron [2007] NSWCA 228, the New South Wales District Court and its Court of Appeal unanimously decided a case about failures to disclose various things in a bill of costs (and by operation of NSW legislation, the result was that no suit could be brought on it for recovery of fees claimed in it). If the case is followed in Victoria and extended to pre-retainer costs disclosure defaults, some balance might be introduced into the unprecedentedly strict regime introduced on 12 December 2005, which I reckon the profession is just beginning to feel the bite of. I was in VCAT’s Legal Practice List today battling over my solicitor client’s bill of costs, and she was certainly complaining. The decision suggests that:

  • the defects may be waived by the client, after which he or she will be estopped from relying on them (at [39] having cited In re Gedye (1851) S.C. 20 L.J. Ch. 410);
  • little compromises in relation to outstanding fees may amount to fresh contracts which may be sued on even if the original bills could not, so that the subsequent suit is not ‘to recover legal costs’ but is for breach of the compromise, and so is not barred by the prohibition on maintaining such suits before completion of a taxation (trial judge’s judgment, see Court of Appeal’s judgment at [22], citing Koutsourais v Metledge & Associates [2004] NSWSC 313; and
  • it is unnecessary to disclose to a client that which he already knows (at [46], citing Hogarth v Gye [2002] NSWSC 32 at [25].)

The decision is a wake up call to the profession which tends to be unable to focus on anything other than the legislation. But the legislation is not a code. A costs agreement remains a contract, and all the law that flows around contracts — including equity — can be brought to bear, to the extent not inconsistent with the legislation. There is a lot of law about retainers and costs agreements, and it can be worth looking up (undoubtedly the best place to start is Dal Pont’s Law of Costs in Australia). There is also much room for original thought by those who have a good grip on the law of obligations. Continue reading “Ways for lawyers to cope with costs disclosure defaults”

Arbitrators slice $40 million off plaintiff lawyers’ breast implant proceedings fees

22 July Update: what may be the first ever legal blog, and without doubt one of the best, Overlawyered has  a link to the arbitrator’s ruling, and links to some old posts dealing with the interlocutory stages of the case. And here’s Law.com’s article.

Houston plaintiff lawyer John O’Quinn has been ordered to repay clients $40 million in legal fees after he was found to have charged his clients for bar association fees, overheads, and flowers as part of a ‘general expenses fee’ of 1.5% of the settlement. Ironically, his former clients ganged up on him. In a class action. They wanted all the fees he charged them back — estimated at $0.66 billion:

‘A Texas Supreme Court case from 1999 opened O’Quinn up to the possibility of having to pay back all the collected legal fees. That case, Burrow v. Arce, held that if a lawyer breaks his fiduciary duty to a client by putting his own interest above the client’s, he can lose part or all of his fee — even if the lawyer did a good job.’

I’ve noted that case before. Scary. Not that he got away without penalty, exactly:

‘The order says that O’Quinn, through three legal entities under which he has practiced law, must pay back [AU$12] million he improperly charged clients and a [AU$28.5] million penalty because he broke his contract with them.

The latest on fiduciary relationships

In the Citigroup Case referred to in the next post, Justice Jacobsen summarised the law relating to fiduciary duties. I have reproduced the whole of the relevant passage, which includes a restatement of the law (at [297]ff) relating to solicitors’ fiduciary duties to give prospective clients full disclosure about the disadvantages of time costing if such a course is proposed.  In my experience, those principles lie gathering dust in real life, and it is a harsh decision maker who trots them out to shaft some poor solicitor who really gets up his nose.  In summary, the principle is:

‘298 A solicitor who wishes to enter into a time charging costs agreement with the client must make full disclosure to the client of all the implications of such an agreement: see Foreman at435-437 per Mahoney JA; Re Morris Fletcher v Cross’ Bill of Costs [1997] 2 Qd R 228 at 243 per Fryberg J; McNamara Business & Property Law v Kasmeridis [2007] SASC 90 at [28] – [31] per Doyle CJ.

299 This principle applies whether or not the costs agreement is made before the solicitor is instructed: see Symonds v Raphael (1998) 148 FLR 171 at 186-187 per Baker and Burton JJ; see also McNamara at [38] per Doyle CJ.’

But here’s the entire exegisis of the law of fiduciary relationships, as applied specifically, to the general case of adviser and client: Continue reading “The latest on fiduciary relationships”

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. Continue reading “Unconscionability and legal fee estimates, again”

Man sues lawyer for declaration in reverse suit for fees

A client sued his former solicitor in VCAT for a declaration that no fees were owing because of costs disclosure defaults by the solicitor. Member Butcher stayed the proceeding pending taxation by the Supreme Court’s Taxing Master on the basis that the sending of a cost disclosure statement at the same time as the work done — in this case a letter of advice — was a default under the Act with the result that the fees were not payable until taxed by the Supreme Court at the solicitor’s expense. He also found that in those circumstances, no costs agreement had come into existence; the offer was made after the performance of the solicitor’s obligations under it. Continue reading “Man sues lawyer for declaration in reverse suit for fees”

How not to bill; how not to deal with a fee dispute; the story of a Yank lawyer

Courtesy of Justinian, I bring you the story of the overcharging New Jersey lawyer who charged like this:

“With regard to the fee, he purportedly spent entire days, sometimes eight or nine hours per day, for several days in a row, apparently in ‘lockdown’ — researching, reviewing and negotiating issues that had little or no bearing on the substance of the transaction. Further, respondent presented nothing to substantiate the time charges underlying the bill. Nothing in the record refuted Ferwerda’s compelling testimony that respondent’s services should have been limited to review of the SBA loan documents, an unalterable lease agreement, and the franchise agreement, itself a non-negotiable contract.”

Then, when the client hesitated before paying the $50,000 bill, he:

“threatened her with criminal prosecution for “theft of services” and he didn’t stop there: He also warned that she might lose her business, her home and her professional license.”

She went to another lawyer, who instituted a fee arbitration. The first lawyer settled by waiving his fee, all the time contending he was perfectly entitled to it. When he was charged with gross overcharging and intimidatory conduct, he failed to appear at the hearing, earning himself a break for 6 months.

Solicitor refers costs dispute to VCAT’s legal practice list

In  Robert J Lawyers v Kirby [2006] VCAT 2609 A client complained about his solicitor’s fees. The Legal Services Commissioner was unable to  settle the costs dispute. The solicitor exercised his right to refer the matter to the Legal Practice List of VCAT. Unusual, but sensible, since the Legal Practice Act, 1996 empowers VCAT to give judgment, effectively, for outstanding fees, and that is what he got, after having 15% knocked off for what I would characterise as a rather technical breach of the Legal Practice Act, 1996’s costs disclosure rules. Continue reading “Solicitor refers costs dispute to VCAT’s legal practice list”

Can the taxing master decide professional negligence claims?

Update, 3 April 2009: It’s still going: Winn v GHB [2009] VSC 93.

Original post: In Winn v GHB [2006] VSC 476, Winn won, another victory for a pro se litigant against their former solicitors, though it seems this former teacher has recently joined the Queensland bar, which suggests she was at something of an advantage over your average punter in unravelling the arcane intricacies of the Supreme Court’s taxing court. Justice Kaye considered whether the Taxing Master was empowered to tax items off a bill of costs in taxable form on a solicitor-client taxation on the basis of professional negligence, and if so, when the process of doing so ought to stop in favour of a properly constituted professional negligence proceeding. His answers? Yes, and it’s a question of degree. Continue reading “Can the taxing master decide professional negligence claims?”

Fees reduced for unconscionability where Legal Practice Act costs provisions did not apply

In Wilkins’s Case [2006] VCAT 2199, Mr Butcher was faced with an application under the Fair Trading Act, 1999 by a client who sought to avoid payment of two accounts in circumstances described in the previous post. The application was brought under the Fair Trading Act, 1999, though which provisions is not clear from the very brief reasons. The reasons are especially brief considering this is the first time to my knowledge that unconscionability provisions have been relied on to diminish legal fees payable by a solicitor because of a costs disclosure default. The solicitor sent a letter to the prospective client which set out the solicitor’s hourly rate but did not give an estimate of total fees. Mr Butcher found at [17]:

“The document … does not comply with s 86 of the Legal Practice Act 1996, which applied at the time. This dispute is not brought under that Act and the situation is that in relation to a dispute under that Act, I am empowered to reduce bills of costs where there has been a failure to comply with s 86 having regard to the seriousness of the failure to provide information. However, this dispute is brought under the Fair Trading Act 1999. I do, however, consider that an examination of whether the appropriate regulatory regime has been complied with is appropriate in deciding whether under the Fair Trading Act 1999 a determination should be made in favour of the applicant. There should have been more extensive advice given by [the solicitor] in relation to legal fees. It was practicable to do so . The failure to give this advice is unsonscionable.”

He knocked about 7.5% off the bill, rounding it down from $3,874 down to $3,000. The justification for this course is explained in the next post.

Roisin Annesley’s Victorian Barristers’ practice guide

The Bar has produced a practice guide. It is a great achievement and stands as a beacon for the Law Institute’s future efforts at promulgating knowledge of the practice rules. The Bar actually has something called the Professional Standards Education Committee. Written by Roisin Annesley, it was launched by Victoria Marles, the Legal Services Commissioner on 18 October 2006, and distributed free to every member of the Bar. Annesley has done a lot of work as Counsel Assisting the Legal Profession Tribunal (and continues to do occasional work assisting the Legal Practice List at VCAT). A doyen of professional discipline, Paul Lacava SC, and a judge who has excoriated Professional Standards, Justice Gillard, are credited with substantial involvement. It has chapters on: Continue reading “Roisin Annesley’s Victorian Barristers’ practice guide”

A complaint for every 6 solicitors last year in England

Here is an article from that most excellent of newspapers, England’s The Guardian, which notes that:

  • the Law Society received 17,074 complaints, one for every six solicitors in England and Wales last year;
  • that was up 14% on 2002;
  • a third of people think they receive poor service from their solicitor;
  • a quarter of those surveyed think their solicitor doesn’t listen to their opinion;
  • a third don’t feel they are told enough about how much they will be charged;
  • more than half the people surveyed said they received no pre-estimate of fees at all; and
  • only about a quarter said they got one in writing.

Costs disputes in England apparently progress through firms’ internal dispute resolution mechanisms, to the Consumer Complaints Service at the Law Society, and then, if the punter is so minded, for review by the Legal Ombudsman. The complaint form used is interesting. It seeks the details of the complainant and the subject of the complaint and says “Please tell us the name and address of the solicitor you are complaining about and briefly state your complaint. (We will contact you later for more details.)” next to a box the size of a postage stamp. That is a sensible approach. I have seen hundreds of complaints. Though Victoria’s regulators were required until recently to give reasonable assistance to complainants in formulating complaints, I do not believe they ever did so. I have seen a case where a man requested assistance and it was flatly denied.

No estimate of fees at outset results in 15% being knocked off

Ieremia’s Case [2006] VCAT 1419

A solicitor signed his client up to a no-win no-fee costs agreement on County Court Scale C in relation to a weekly payments dispute with Workcover. The weekly payments were reinstated as a result of the solicitor’s work, though Workcover did not permit him to attend the conciliation at which that result was achieved. He did provide written submissions in advance of the conciliation, however. Because he failed to provide any estimate of fees at all, Mr Howell knocked 15% of his bill for about $1,400 for disbursements includes $1800 for professional fees and ordered the client to pay the discounted amount. Continue reading “No estimate of fees at outset results in 15% being knocked off”