The Keddies overcharging civil case no. 1

Liu v Barakat, unreported, District Court of NSW, Curtis J, 8 November 2011 is the latest in an ongoing scandal in NSW in relation to overcharging by a prominent personal injuries practice which traded as Keddies, but has subsequently been gobbled up by a publicly listed company.  Many are unhappy at the strike rate of the NSW Legal Services Commissioner in the whole affair (the sole remaining disciplinary prosecution is two and a half years old and not heading to hearing until April next year), but now the District Court has given judgment in a case finding what appears to amount to fraudulent misrepresentation in relation to the billing of about $69,000 (reduced on a ‘but say’ basis to about $64,000) in a personal injuries case where liability was admitted before Keddies got in the harness, and where the proper charge was about $21,000.  Justinian‘s Richard Ackland has the background and latest here.

The partnership apparently bungled the settlement of a taxation allowing the claim to slip through to judgment, and Judge Curtis of the NSW District Court ended up ordering Keddies to repay to the client the difference between what they charged and what they were entitled to charge.  The reasons provide food for thought for those out of time to commence taxation because the judge found that the bills had within them implied representations that the amounts billed were properly chargeable at law.  He reduced the fees chargeable by Keddies to the amount in fact properly chargeable at law, something which would ordinarily be achieved in a taxation.  Such logic might be employed in many cases in the 5 years after a bill during which the client is out of time for taxation but within the 6 year limitation period for prosecuting a misleading and deceptive conduct claim.

The case will be seized on by opponents of hourly billing, and perhaps properly so (the first 6 minutes or part thereof charged for sending a pro forma welcome letter which required only the insertion of the client’s name is an example of why minimum charges of 6 minutes are abhorrent when applied literally, for example).  But it really appears to be a case about simple dishonesty (by whom is not made clear), because in the main this was not a case where the clients were billed outrageously albeit according to the terms of a contractual agreement which bound them.  I say that because if there was any innocent explanation advanced by the Keddies partners for the conduct the most obvious explanation for which was someone’s dishonesty, it was not recorded in the judgment.  This was a case where, in the main, work was charged for which was not done (most likely as in the case of the second 6 minutes or part thereof billed for the welcome letter), or not done by a person whose contractually agreed rate warranted the charge for the time spent.  For example:

• A secretary was impermissibly charged at partners’ rates ($460 per hour).
• One hour’s work was charged on 4 October 2005 for drafting the costs agreement which had been signed on 30 September 2005, and an associated explanatory document at  senior litigation lawyer rates, when in fact all that was required was the insertion of the client’s name.  The Court held that the rate which would have been properly chargeable under the costs agreement had that been the appropriate method of billing was 6 minutes of a secretary’s time at secretaries’ rates. No argument appears to have been advanced that this was not work done for the client, but the lawyers’ own costs of entering into a contract to which they were a party and which they wished to propose the terms of.  There is no record of any evidence having been given that the time entry was a mistake, and it is hard to see how the recording of time beyond (at most) one block of 6 minutes or part thereof could have been anything other than outright dishonesty on at least someone’s part within Keddies, even if this activity was properly taken to be work engaged in by the solicitors on the client’s behalf.
• A charge for two blocks of 6 minutes or part thereof was charged at the secretaries’ rate for reading a letter advising the time, date and place of a medical appointment, a further charge of two such blocks for ‘considering’ that letter, and a further charge of two such blocks for advising the plaintiff by letter of that information.  The total bill for work which it is hard to see taking 5 minutes of a secretary’s time was $108 (for which incidentally, just to keep this real, you can currently have a linguine with fresh sardines, pine nuts, currants and saffron, a gravlax, three glasses of Italian prosecco, a chocolate pudding with peanut butter ice cream and a strawberry mousse with jelly and meringues at Gill’s Diner).
• The plaintiff was charged $184 (4 blocks of 6 minutes or part thereof at partner rates) for reading, then considering, a letter which said ‘We enclose authority for execution by your client to enable us to obtain documentation from the Department of Immigration and multicultural and indigenous affairs.  Please have your client sign the authority and returned to us as soon as possible.’
• The plaintiff was charged $131 (3 blocks of 6 minutes or part thereof at partner rates) for reading an email the non-formal parts of which read ‘Rcv’d’.  (What a freaking joke!) She was charged the same amount for reading the email to which that was a reply, the non-formal part of which read ‘I refer to our telephone call this morning.  I have been directed by Assessor J Snell, to inform CARS: 1.  The CARS hearing date on 14 September 2005 has been vacated — please cancel the interpreter arranged by CARS. The CARS hearing date has been rebooked for 17 November 2006 at 10 am — please rebook a Mandarin interpreter.’

It will be interesting to see the response of the police, the NSW Legal Services Commissioner and the Council of the NSW Law Society to the judgment, especially in light of the fact that the plaintiff’s complaint to the Commissioner was officially withdrawn, a fact which did not of course prevent the Commissioner from continuing to investigate it: s. 512 Legal Profession Act 2004 (NSW).  Somewhat surprisingly, I learn from that section, that the withdrawal of the complaint also does not prevent the complainant from re-lodging it: sub-s. (5).

Let’s go back to the start, though, and take a closer look at the facts of the matter.

The plaintiff was injured in a car accident in 2001.  Six months later, she sued the owner of the other car.  Within about three weeks, the other car’s owner admitted liability through their liability insurer.  Three and a quarter years on, for some inexplicable reason, the proceedings remained unresolved.  The plaintiff hired a partnership of lawyers trading as Keddies, a prominent personal injuries firm in Sydney, to take over from her original lawyers.  The original lawyers’ fees had reached about $10,000 and they handed over their file to Keddies on condition that the fees be paid out of any settlement or judgment obtained for the plaintiff, though it appears from the judgment that Keddies did not propose to do so at the time of the settlement.

A year into Keddies’ retainer, they settled the plaintiff’s case for $140,000: about $64,000 for them, about $50,000 for her, and the rest went on ‘statutory deductions’ which are a characteristic of personal injuries litigation.  As noted above, the bill purported to give the plaintiff a ‘but say’ discount of more than $5,000, just for the hell of it.  Nine and a bit months after the rendering of the bill, the plaintiff sought to have it taxed.  Less than a month later, the taxation was settled on the basis that a company named Keddies Insurance Law Specialists Pty Ltd would pay the plaintiff $15,000 plus costs of the application for taxation in full and final settlement of a dispute in relation to the company’s fees for doing legal work for the plaintiff. The problem was that the company had never done any legal work for her and the partners made no application for rectification of the deed so as to record properly an agreement between the partnership which had traded as Keddies and the plaintiff.  So the Court rejected the Keddies partners’ contention that the settlement of the taxation gave rise to an accord and satisfaction.  That is, it held that the dispute as to the fees payable by the plaintiff to the partnership named Keddies who had acted for her remained on foot. Three weeks later, the plaintiff withdrew a complaint of overcharging made to the NSW Legal Services Commissioner.

The plaintiff sued the partnership for breach of retainer and misleading and deceptive conduct.  The breach was of an express written term that the firm would only charge for work that they did: the costs agreement said ‘We will charge you for the work done’.  The misleading and deceptive conduct was the making of false representations set out in the bullet points below.

The Court found that the partnership had not complied with costs disclosure obligations under a statute which specifically governed the costs of motor vehicle litigation, with the result that they were only entitled to charge pursuant to a scale specified by that Act.  The unchallenged expert evidence was that on scale, the permissible costs were about $21,000.

The Court found that Keddies had engaged in a fraudulent misrepresentation at the time of entering into the costs agreement by representing to her that they would only charge her for work that they did on her case, whereas they intended to charge her for drafting documents which they knew already existed.  It found other misrepresentations too:

• misleading recording of fees ‘into the Ledger’;
• a misleading representation that the fees to which the Keddies partners were properly entitled, along with statutory deductions, reduced the amount payable to the plaintiff under the settlement to $50,000;
• a misleading representation by the provision of their bill to her that they were legally entitled to the amounts claimed in it; and
• a misleading statement in the settlement statement to the effect that the partners were legally entitled to deduct from the settlement sum about $64,000.

The Court found that had the plaintiff known Keddies intended to charge her for work that was not done, she would never have retained them.  And it also found, presumably but not expressly in the alternative, that had she known that the true amount which Keddies was properly entitled to charge was about $21,000, she would ‘never have signed instructions to accept $50,000 clear’.  Without explanation and apparently without analysis of what would have happened in the hypothetical world where Keddies had never been retained, the Court went on to find that the measure of her loss was the difference between what the plaintiff was charged and what she should have been charged.

Even in relation to the alternative causation case — the misrepresentations led the plaintiff to sign the instructions acknowledging that she would get $50,000 out of the settlement — I remain unclear exactly what rights were lost by the signing of instructions to accept $50,000 clear so as to constitute loss and damage.  It does not seem to have been said that the plaintiff would not have settled for $140,000 and would have got more in a better settlement or by a judgment.  Solicitors are required to tell their clients what they will end up with in their pockets net of costs under any settlement offer made or received by the solicitors.  If the plaintiff just signed an acknowledgment of receiving such advice, it is unclear to me that she gave up any right to challenge the amount of Keddies’ costs which reduced her in-the-pocket entitlement to $50,000.  Indeed, she does not seem to have given up that right because she sought taxation, and it was compromised apparently without resort to any argument that it was inappropriate in light of the signed instructions acknowledging that the plaintiff would be entitled to $50,000 clear.  The judgment is insufficiently detailed on this issue for me to understand it.