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A critique of S.172 Legal Profession Uniform Law (NSW) 2015.

Charles Galayini | Tuesday, December 19, 2017
A critique of S.172 Legal Profession Uniform Law (NSW) 2015.

The Legal Profession Uniform Law (NSW) (LPUL) became law in NSW and Victoria on 1st July 2015. Sections 170-195 are fundamentally devoted to the costs that law practices are able to charge.

This article attempts to critically analyse S.172 of the LPUL and its subsections, however, much of the wording seems to fumble around using sophisticated phrases which have very little common sense or realistic meaning. For example, S.172 is entitled “Legal costs must be fair and reasonable.”

The subparagraphs thereafter seem to tautologically bungle around in some attempt to clarify an incomprehensible statement which formed the heading of the section. There is a chilling undertone that presumes lawyers are attempting to cheat their client’s by charging a fee for the service they provide.

S.172 (1)

(1) A law practice must, in charging legal costs, charge costs that are no more than fair and reasonable in all the circumstances and that in particular are:

(a) Proportionately and reasonably incurred; and

(b) Proportionate and reasonable in amount.

We will start with the word “Proportionate.” The big question is proportionate to what? Here are some examples.

In personal injury matters Governments in all states of Australia have created thresholds and caps in a well organised agenda to reduce or even eliminate compensation to injured people so as to preserve Insurance company profits. At the same time Governments have created a multitude of legislative hurdles put in the way of injured litigants designed to discourage injured people from bringing law suits.

These combined legislative influences have increased the cost and time of litigations and at the same time reduced the compensation available. These factors often result in legal costs higher in proportion to the potential outcome. In order therefore to adhere to this chaotic concept of proportionality, lawyers must either reduce their fees or reduce efficiency levels by cutting corners.

If lawyers cut corners, they are playing with fire. The opposition will know, judges will know and ultimately their clients will know which will more than likely lead to a negligence claim against the lawyer, not to mention bringing on the wrath of the judge.

If lawyers reduce their fees but try to maintain efficiency levels the doctrine of opportunity cost will inevitably apply to significantly affect profit levels and could lead to practice closures.

If judges, whilst applying the laws which have significantly reduced people’s rights, award small verdicts do lawyers for the insurance companies reduce their fees. The answer is no.

Therefore it is quite possible to have the asinine situation apply where two lawyers in the same case, on different sides, are charging the same costs, yet one lawyer, the one on the winning side is found to have charged unfair and unreasonable costs whereas the lawyer on the losing side is charging reasonable and fair costs.

In Family Law matters, the most significant task confronting lawyers for either side is to try and calculate the pool of assets. When a net equality is established, its fatal assets less total liabilities, the parties know what they are fighting over. Then the laborious task of assessing contributions between the parties and if necessary parenting orders, will commence.

The cost involved in having matters resolved by way of a hearing in the Family Court or Federal Circuit Court is very significant due to the labour intensive procedure. If the proportionality principle was strictly applied then only the wealthy would be entitled to have their matters heard by a judge. Only the wealthy would have access to counsel and only the wealthy would have access to experienced solicitors.

If the parties only have one house, the former matrimonial home which invariably is subject to a mortgage, then they would only be represented up to a certain cost level then after that they are on their own.

A similar scenario would exist in estate cases. If the proportionality rule is to apply, reasonable costs are measured in relation to the equity in the estate.

Family law matters and estate matters have many aspects in common. They are heard in courts which adopt strict pleading requirements. Evidence is obtained in affidavit form and full disclosure to the opposition is obligatory. Both jurisdictions are very much emotion driven.

In Family law matters, a high emotion changed environment exists because of a family break up, usually an acrimonious one and made even more stressful where children are involved.

In estate matters a family member has died and other family members are often involved in a bitter battle over the deceased assets.

Is it more palatable in those emotion changed cases to, have representing such litigants in a court or would the judge prefer to hear a case presented by unqualified litigants who are emotionally driven and usually cannot stand to be in the same room with one another?

The answer is clearly that the court would prefer to have the case presented by a professional, objective individual, not emotionally driven but are there to work. These professionals are called lawyers.

The proportionality rule should not only be relaxed, it should be given no weight at all. As long as people are aware of the cost in going to court and are still comfortable to proceed that should be the end of it.

S.172 (2)

In considering whether legal costs satisfy subsection (1), regard must be had to whether the legal costs reasonably reflect –

  • (a) the level of skill, experience, specialisation and seniority of the lawyers concerned; and
  • (b) the level of complexity, novelty or difficulty of the issues involved, and the extent to which the matter involved a matter of public interest; and
  • (c)the labour and responsibility involved; and
  • (d)the circumstances in acting on the matter, including (for example) any or all of the following –
  • (i)the urgency of the matter;

(ii) the time spent on the matter;

(iii) the time when business was transacted in the matter;

(iv) the place where business was transacted in the matter;

  • (e)the quality of the work done; and
  • (f)the retainer and the instructions (express or implied) given in the matter.

The subsection should, with respect, end at S.172 (2) (a).

Lawyers are entitled to charge for their legal services performed. In this commercial world in which we live, this presumption should be self evident. If lawyers choose to charge a higher rate because of their level of experience, specialisation on seniority, then so be it.

Throughout the commercial world there are different levels of products and invariably those levels are disguised by their price. It is ultimately the consumer who decides by looking at the competition which product they buy. It is no different in the legal profession and the client has a multitude of lawyers from which to choose.

The balance of the subsection, S.172 (2) (b) – (f) is the Governments attempt to codify that which should not be codified. Lets again look at each individual phrase and words which will demonstrate the naivety of the law.

  • (a)“The level of complexity”

There are only two types of court cases which are not complex. Those which are finished and those which are run by lawyers other than yourself.

Court cases are disputes between two or more individuals or organisations, which cannot be resolved without the assistance of the court process. This process is punctuated by legal procedure, a vast legislative framework and is facilitated by rules of evidence which screen the introduction of facts and circumstances put forward by the litigants as a precursor to the resolution of the dispute.

Add to that the inevitable human floor of emotional turmoil and I challenge you to find something which is “not” complex.

Good lawyers, in particular good litigators do not have the luxury of considering anything uncomplicated. The minute they consider something simple or not complex, that is when they run the risk of missing something.

I can, with respect see how costs assessors and or judges may consider certain cases not complex in assessing them for the purpose of S.172 (2) (a) LPUL. After all by the time judges and costs assessors are involved the matters are finished and the costs assessor or judge didn’t run the case. Remember, every case is easy when it is finished and you didn’t run it in the first place.

The truth is, with the greatest respect, such a phrase as “level of complexity” should be dealt with in only one way. Every case achieves a level of complexity sufficient for the lawyer’s fees to be fair and reasonable.

  • (b)“Novelty”

Every case is novel to the most important person in the proceedings; the client unless they are in court every week their case is novel to them and very significant in their lives.

Just because someone, somewhere may consider particular court proceedings more intellectually stimulating than others does not mean that those lawyers are charging more reasonable fees.

For example, lawyers charging fees for running a car accident case on behalf of an injured motorist are entitled to consider their fees just as reasonable as a lawyer running a case on behalf of an artist, who considered his portrait qualified as a portrait for the Archibald prize, as in the case run by Sir Garfield Barwick in 1943 on behalf of William Dobell.

  • (c)“Difficulty of the issues involved”

For the same reason that all cases have significant levels of complexity, all cases have difficulty issues. All issues are easily resolved with the benefit of hindsight. If the issues were not difficult they would not have been the subject of litigation process.

  • (d)“The extent which the matter involved a matter of Public interest”

I can guarantee there is at least one member of the public who is extremely interested in every matter. The client.

I can only conclude from this section, that lawyers working in the High Court are charging reasonable fees. After all what greater public interest can there be than precedents coming from the High Court.

  • (e)S.172 (2) (c) – (f)

All court matters are labour intensive. The responsibility is the same in every case which is to represent your client to the best of your ability.

Every matter has some degree of urgency in it, in particular when complying with court directions.

The time spent on a matter should be presumed to be how much time the lawyer deems necessary. There seems to be a presumption that lawyers purposely delay matters. There is no logical reason for a lawyer to delay a matter and think this is somehow more profitable. The most lucrative way to deal with matters is to finish them quickly, receive payment and move to the next matter.

The time and place where the business was transacted depends on each case in isolation.

Every document involved in a court case is important. When a lawyer reads documents and dismisses the documents for relevance, this process is as equally important as the lawyer reading a document and identifying it as relevant. It is possible to examine hundreds or even thousands of documents and only one may be relevant. This process is a vital area of legal expertise. By analysing the entire material evidence lawyers can relieve the court of the burden of reading irrelevant material and assist the court in arriving at a decision which is likely to come close to the right decision.

Summary

The truth is that for an accurate assessment of fair and reasonable legal costs to be achieved, the costs assessor should presume that every court case is complex and the lawyer’s responsibility is high. Instead, when costs assessors seek submissions on S.172 as to the fair and reasonableness of Legal costs, the opposite is the case. Lawyers are required to prove that their cases are complex and that they have a high responsibility.

For lawyers, the best advice is to avoid trying to make submissions to a costs assessor in relation to S.127. To borrow a phrase from Game of Thrones, “if its justice you want, you will not find it here”.

Costs Cover can be of great assistance in this regard. A Costs Cover panel solicitor can negotiate on your behalf looking at the matter through the prism of objectivity and maximising settlement options.

This will increase the chances of avoiding the costs assessment process completely.

 

John Andriano – Accredited Specialist, Personal Injury Law

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Costs Assessor Accuses Law Practice of Charging at a Grossly Excessive Amount in a Pro Bono Case.

Charles Galayini | Thursday, October 12, 2017
Costs Assessor Accuses Law Practice of Charging at a Grossly Excessive Amount in a Pro Bono Case.

A Costs Assessor in NSW recently reported a Law practice to the NSW Legal Services Commission for charging at a rate that was grossly excessive pursuant to S.322 Legal Profession Act 2004.

The problem was the Law Practice was doing the matter on a pro bono basis and did not charge any fees at all. The costs assessor didn’t bother to find out all the facts, instead chose to “shoot first and ask questions later.”

The brief facts of the case were as follows:

  • (a)The client attended a physiotherapist. The physio applied an electric heat pack to the back of the client (Plaintiff).
  • (b)The Plaintiff suffered third degree burns. She required emergency surgery at Concord Hospital Burns unit, which included a skin graft.
  • (c)The client instructed the law practice to sue the physio.
  • (d)The law practice instructed Counsel, obtained expert evidence on liability and on the injury itself which included plastic surgeon reports.
  • (e)Proceedings were commenced and after some investigation the physio was located.
  • (f)The physio was uninsured and had no assets.
  • (g)When it became clear that a judgement against the physio was useless, the Law Practice decided to negotiate with the physio and run the case pro bono.
  • (h)The physio, feeling responsible, paid a modest sum. The Plaintiff received some money, the Experts, Doctors, Court, Counsel and interpreters were paid something but the law practice received no fees and charged zero in Costs.
  • (i)The assessor was called upon to assess a small party/party bill of about $8,000.
  • (j)The assessor decided, without any investigation or complaint by the client and without seeking submissions by the law practice, to report the law practice for charging at a rate which was grossly excessive.

These circumstances, whilst bizarre, create an interesting insight into the mind of the modern-day costs assessor that a situation can exist where charging zero costs is overcharging.

If the costs assessor is considered by the LSC to have acted properly then the only lesson which can realistically learned from this laughable set of circumstances is to avoid costs assessors and negotiate costs disputes.

This provides a perfect example why Costs Cover is a vital risk prevention strategy in your law practice. If you have purchased Costs Cover, the panel lawyers will professionally and objectively conduct negotiations on your behalf in the event of a costs dispute with your former client.

The panel lawyers allocated will attempt to negotiate and if necessary attend mediation as a precursor to the costs assessment process, thereby maximising the chance to settle the matter before being exposed to a potentially client-bias costs assessor.

If a costs assessor is prepared to report a solicitor to the LSC for charged nothing, I shudder to think what will happen if a firm actually charges for providing their services.

By Charlie Galayini – GSA Business Development Manager

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Clients disputing out of time bills – Adverse Costs Order in Lukic -V- De Luca – Leonard

Charles Galayini | Thursday, October 12, 2017
Clients disputing out of time bills – Adverse Costs Order in Lukic -V- De Luca – Leonard

In July 2017, we shared a Case Note of Lukic V De Luca Leonard (No.2). The only issues left to be resolved were whether the solicitor De Luca – Leonard would be ordered to pay ordinary costs or indemnity costs. His Honour Harrison J ordered on 27th September 2017 that the solicitor should pay indemnity costs.  Read More


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