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Quick, Roger --- "Solicitor and client bills under legal profession uniform legislation" [2016] PrecedentAULA 78; (2016) 137 Precedent 32


  • SOLICITOR AND CLIENT BILLS UNDER LEGAL PROFESSION UNIFORM LEGISLATION

    By Roger Quick

    The Legal Profession Uniform Law (LPUL) has been in force since 1 July 2015, subject to the operation of transitional provisions. This article suggests that the key reforms of LPUL may overlook the importance of the bill in the continuum of disclosure, retainer or costs agreement, assessment and recovery of costs, but that they allow better billing.[1]


    KEY REFORMS

    The reforms as to business management and control

    The Model Law and the Legal Profession Acts (LPA) entitled law practices to practise as incorporated legal practices (ILPs) and created a specific framework for regulating legal practice by ILPs. Under LPUL, a law practice is defined to include both unincorporated and incorporated law practices. Under the framework established for ILPs, LPUL entitles law practices to provide legal services under any business structure and to provide services other than legal services as multi-disciplinary practices.

    The reforms as to dispute resolution, complaints and professional discipline[2]

    LPUL, like the Model Law and the LPAs, provides that any person or body may make a complaint about a lawyer or law practice to the relevant designated local regulatory authority.[3] Essentially complaints concern either disciplinary matters or consumer matters. A consumer matter is defined to include a solicitor and client costs dispute within specified monetary limits.[4] A designated local regulatory authority is to attempt to resolve a consumer matter but if those attempts fail may resolve the consumer matter by making a determination that is fair and reasonable. Such a binding determination may include requirements to redo work, waive or reduce fees or pay compensation. Failure to comply with a binding determination can constitute unsatisfactory professional conduct or professional misconduct.

    The reforms as to legal costs[5]

    The LPUL gives statutory expression to the existing obligation on law practices to charge no more than fair and reasonable costs, but adds two further principles.

    The first is a principle that a law practice must, charge costs that are no more than fair and reasonable in all the circumstances and, in particular, that are proportionately and reasonably incurred and proportionate and reasonable in amount.[6] By s172(2) LPUL, in satisfying these requirements, regard must be had to six criteria. These are skill, complexity, labour and responsibility, quality of work done, the retainer and instructions given, and a number of circumstances in acting in the matter including urgency and time spent on the matter.

    It may be some time before the meaning of these requirements that legal costs be fair, reasonable and proportionate is settled. Opening shots aimed at the meaning and scope of operation of the proportionality principle have been fired by two of the Australian intermediate appellate courts.[7]

    The second of these additions is the re-expression in s173 LPUL of a common law principle that a solicitor must not act in a way that unnecessarily results in increased legal costs payable by a client, and must act reasonably to avoid unnecessary delay resulting in increased legal costs.[8] However, it is this principle that if it is read with ss174(2)(a)(ii) LPUL (a client’s right to disclosure of additional information to negotiate the billing method) and 174(3) LPUL (the solicitor’s obligation to be satisfied that the client has understood and given informed consent to the proposed conduct of the matter and the proposed costs) that opens up a way to better billing.

    There remain significant differences between Victorian and NSW practice as to costs as a result of the changes to the costs provisions of the LPAs made by the Application Acts.[9]

    Differences as to costs assessment in NSW, in particular, include the fact that both assessments between a solicitor or law practice and a client and party/party assessments are administrative in nature and though both are managed by the Manager Costs Assessment, a Supreme Court Registrar, neither one of them are Supreme Court ‘proceedings’.

    In Victoria, assessment, or review of assessment, including costs matters from orders in the County Court, the Magistrates Court and the Victorian Civil and Administrative Tribunal (VCAT), remain a Supreme Court activity as a result of the creation in 2010 of a reconstituted division of the Supreme Court, the Costs Court.[10]

    COMMERCIAL OR GOVERNMENT CLIENTS

    By s170(2) LPUL, commercial and government clients (the old ‘sophisticated clients’) are not governed by LPUL pt 4.3 unless they contract into the Part.[11] Therefore, they have no rights under div 2 (s172 (fair and reasonable costs) and s173 (avoidance of increased legal costs)), div 3 (costs disclosure), div 4 (ss179, 180, rights to a costs agreement save for particular sections relating to conditional fee agreements and uplift fees), div 5 (billing), div 6 (unpaid legal costs), div 7 (costs assessment), and div 8 (which includes s206 security for legal costs and s207 right to take disciplinary action for charging unreasonable costs). In NSW sophisticated clients were already able to contract out of costs assessment under s395A LPA (NSW).

    .

    CONDITIONAL COSTS AGREEMENTS AND CONDITIONAL BILLS

    Conditional costs agreements

    Costs agreements can be categorised as unconditional costs agreements and conditional costs agreements. Conditional costs agreements in turn may be categorised as agreements either with or without uplift fees.[12]

    The LPUL has removed the prohibition under s324 Legal Profession Act 2004 (NSW) that a law practice must not enter into a conditional costs agreement in relation to a ‘claim for damages’ that provides for the payment of an uplift fee on the successful outcome of the claim to which the fee relates. Section 182 LPUL NSW now allows a conditional costs agreement that relates to a litigious matter to provide for an uplift fee of up to 25 per cent. For non-litigious matters the uplift fee is not restricted to 25 per cent.

    For motor accidents matters, the restriction in cl8(b) of the Motor Accidents Compensation Regulation 2015, that a conditional costs agreement must not include any premium at all remains. Similarly, for work injury damages matters, cl93 of the Workers Compensation Regulation 2016 limits the premium in a conditional costs agreement to 10 per cent.

    Conditional bills

    In a very different way bills, or their delivery, may also be conditional. The conditional bill is a usually a lump sum bill delivered to the client subject to a condition that will usually be that the amount of the bill may change. Nowadays we have a sixfold classification of solicitor and client bills: interim or final bills; bills in lump sum form or bills in itemised form; and conditional or unconditional bills.

    An interim bill is a bill for part of the legal services a solicitor has been retained to provide and a final bill is the bill for the last of the services that the solicitor has been retained to provide. In other words, the final bill completes all the services the solicitor has been retained to provide. A final bill is not necessarily the last bill in time.[13]

    By s186 LPUL, a bill may be either a lump sum bill or an itemised bill. By s187 LPUL, a person who is entitled to apply for assessment of the legal costs to which the lump sum bill relates has a right to request an itemised bill within 30 days after the date on which the legal costs become payable. Neither of the terms ‘lump sum bill’ or ‘itemised bill’ are defined by LPUL itself. Regulation 5(1) of the Legal Profession Uniform General Rules 2015(LPUGR), provides that lump sum bill is one that describes the legal services to which it relates and specifies the total amount of the legal costs and that an itemised bill means a bill that specifies in detail how the legal costs are made up in a way so as to allow costs to be assessed. The level of itemisation required by an itemised bill is considered in the section below.

    On informed guesswork there are four possible cases in which a solicitor may seek to make a reservation of rights to change the amount of a lump sum bill either in a costs agreement or in delivering a bill. In the first, the solicitor delivers a smaller lump sum bill for which they seek to substitute a larger itemised bill through the reservation of rights. It is in this case that reg 74 LPUGR seeks to validate the use of the reservation of rights.

    There are at least three difficulties with reg 74. The first is that it deals with the one case where the solicitor is seeking to increase the amount of his initial lump sum bill. Secondly, this case commonly happens when the client requests an itemised bill in order to decide whether or not to go to assessment and the reservation is used to discourage the client. Thirdly, reg 74 would seem to be susceptible to challenge under the Australian Consumer Law (ACL) if the unfair terms provisions of ACL pt 2.3 apply to the costs agreement or, alternatively, if the conduct in issuing the lump sum bill and seeking to replace it with a larger itemised bill is misleading or deceptive within s18 ACL.


    LUMP SUM OR ITEMISED BILLING?
    In NSW prior to 1 July 2015, Legal Profession Regulation 2005 (NSW) reg 111B, (contents of itemised bill), provided some measure of standardisation for the bills of both solicitors and barristers. It will continue to do so where the LPA continues to apply under the transitional provisions (see the Transition to UL/LPUL, below). It has not been continued under LPUL.

    There is no equivalent to reg 111B in Victoria.


    A CLIENT USUALLY REQUESTS AN ITEMISED BILL AT THE END OF A MATTER, AND THE SOLICITOR HAS TO DECIDE WHETHER TO ACCEPT THE REQUEST AND PREPARE AN ITEMISED BILL OR REJECT THE REQUEST. ASSUMING THAT THE QUESTION IS TO BE ANSWERED UNDER THE LPA OR LPUL AND NOT UNDER THE ACL, THE CLIENT CANNOT ASSUME A COURT WILL ORDER AN ITEMISED BILL BECAUSE IT HAS A DISCRETION WHETHER OR NOT TO DO SO.[14] Nor can solicitors assume that the court will agree to their rejecting the request because that decision, too, is discretionary. Alive to the purposes of the statutory right to make the request and commercial realities, the courts have said that in deciding whether or not to grant the request, they will need to strike a balance between two needs.
    THE FIRST NEED IS TO PROTECT THE CLIENT AND FOR THE ITEMISED BILL TO GIVE SUFFICIENT INFORMATION SO THAT THE CLIENT CAN JUDGE WHETHER THEY HAVE BEEN OVERCHARGED. THE SECOND IS THE NEED TO PROTECT THE SOLICITOR AGAINST A LATE AMBUSH BEING LAID ON A TECHNICAL POINT BY A CLIENT WHO IS SEEKING ONLY TO EVADE PAYING THEIR DEBT.[15]

    If the court decides to grant the request for an itemised bill, it has discretion decision to decide the level of itemisation to which the client is entitled in the absence of some standard like that set by reg 111B.

    The difficulty of guessing how the court will exercise these related discretions will often make a compelling argument for accepting the client’s right to an itemised bill when requested.

    There is, however, an even stronger case for recognising the continuum comprising disclosure, retainer or costs agreement, assessment and recovery of costs and grappling with the problems posed by the itemised final bill from the outset.

    The problems have been recognised for a very long time. There are distant and uncertain solutions in the UK and in NSW. In NSW the Chief Justice’s review of the Costs Assessment Scheme, the first review since the Scheme’s inception in 1993 and the recommendations from it, according to the Attorney-General’s second reading speech on LPUL ‘remain under consideration, to be progressed at a later time.’

    What is feasible and capable of more certain success is to take stock of what your technology can do and must do for you in creating interim and final bills and train in the ‘do’s’ and ‘don’ts of costing, in the tricks and traps of recording work and time, as well as in the processes of assessment. This should result in an ability to disclose fully, record correctly and bill reasonably which will allow the preparation of better final bills that is, bills for all the client’s work and not just unpaid work. That ability will certainly allow the use of assessment either to recover costs or to defend them, that is an offensive as well as a defensive use of assessment.[16]


    THE FORMALITIES FOR CHARGING UNDER LPUL

    These will be familiar to many but are important to all.

    LPUL s188 provides that bills or a letter accompanying the bill must be signed by a principal of the law practice. This raises practical issues for small firms and sole practitioners unless an electronic signature is agreed or deemed to comply. It is important to note that LPUL s194 prevents a law practice from commencing proceedings to recover legal costs until a bill is given which complies with the requirements of the LPUL and LPUGR.

    Under s189 a bill must be given in accordance with LPUGR.

    Rule 72 LPUGR provides that for the purposes of LPUL s189 a bill may be given by:

    • delivery in person;

    • post;

    • leaving at last address;

    • DX;

    • fax, if the client agrees; or

    • electronically, to an email address or mobile number or by other means, if the client agrees. The costs agreement should therefore provide for delivery by fax or electronic delivery.

    Under s191 LPUL, charging for the preparation and delivery of bills is prohibited, without exception for bills provided to non-associated third parties.

    By s192 LPUL, the bill continues to need ‘the notification of a client’s rights’ – that is, either a notice in the bill or an accompanying statement in relation to the avenues open to the client in the event of a dispute as to costs and any time limits applying.

    By s194(2) LPUL, a solicitor cannot commence proceedings to recover costs until at least 30 days after the bill has been given or the date on which the person receives an itemised bill following a request for this.

    Section 194(2) LPUL also requires that a solicitor not commence proceedings until a costs dispute is finalised and s198(7)(b) LPUL provides that a law practice may not commence proceedings to recover costs until a costs assessment has been completed. However, a costs assessment does not stay proceedings that have been commenced.

    Interest on costs

    By s195(1) LPUL, a solicitor may charge interest on unpaid legal costs in accordance with the applicable terms of a costs agreement.

    If the terms of the costs agreement do not deal with the charging of interest, under s195(2) LPUL interest is charged for costs that are unpaid from 30 days or more after the bill has been given.

    By s195(3) LPUL, a bill must contain a statement in relation to entitlement to charge interest. Interest cannot be charged if this statement is not included in the bill. The statement needs also to include the rate of interest. By s195(4) LPUL, the maximum interest rate is determined by LPUGR. As at September 2016, reg 75 LPUGR provides that the rate of interest is equal to the Cash Target Rate specified by the Reserve Bank of Australia as at the date of issue of the bill plus two percentage points.

    Under the new s195(5) LPUL, a solicitor must not charge interest on a bill given more than six months after the completion of the matter. This provision does not apply if the bill was not issued within the six-month period at the request of the client. It is particularly relevant to counsel for whom it could be argued that the matter is concluded when counsel’s involvement ceases, which could be many months prior to the actual finalisation of the matter.

    ALTERNATIVE FEE ARRANGEMENTS (AFA) AND LEGAL PROJECT MANAGEMENT (LPM) ANYONE?

    When s173 LPUL is considered with ss174(2) LPUL and 174(3) LPUL , it is clear that the client must play a role in agreeing how their work will be managed. The disclosures required by s174(2) include the client’s rights to negotiate a costs agreement and the billing method ((‘for example by reference to timing or task’) (s174(2)(a)(iii)). Section 174(3) requires a law practice to ensure that the client understands and consents ‘to the proposed course of action for the conduct of the matter and the proposed costs’.

    AFAs are optional or alternative fee arrangements to time billing, the so called ‘billable hour’.[17]

    LPM is a scalable concept which treats a piece of legal work as a legal project capable of management because, [18] like a physical project, that piece of legal work is a temporary endeavour undertaken to create a unique product, service or result with a definite beginning and end.

    The concept and techniques have the potential to add significantly to the chances of successful management of matters small and large because they require or allow consideration of matters including scope management, time management, cost management and quality management.

    These methods are not exhaustive. For example, hybrid AFA’s are possible and likely, so that in any particular piece of work part may be suitable for hourly rates and part for a fixed fee. Australia is also ‘playing catch up’ with the US and UK on these and related concepts such as costs management.

    THE TRANSITION TO UL/LPUL

    The Legal Profession Act 2004 (NSW) and Legal Profession Regulation 2005 (NSW) continue to apply to solicitor, client and third-party costs assessments applications where the client first instructed the solicitor before 1 July 2015, even if counsel was instructed after 1 July 2015.[19]

    LPUL applies to uniform costs (formerly client and practitioner costs) where the client first instructed the solicitor on or after 1 July 2015.[20]

    The ‘half life’ of templates used where a solicitor was first instructed before 30 June 2015 is likely to be several years. In Keesing v Adams [2010] NSWSC 336, the decision was given in 2010 but the costs agreement to which it related was entered into in August 2003 and therefore subject to the Legal Profession Act 1987 (NSW), the legislation preceding the LPA 2004. A similar result was obtained in Eversol Legal Services Pty Ltd v Bechara [2010] NSWDC 72.

    In addition in eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd [2015] NSWCA 284 at [19] and [20], Basten JA suggested that the operation of the transitional provisions in sch 4, cl2 was not entirely straightforward. This was because of the cross-reference to the Interpretation of Legislation Act 1984 (Vic), which in s14 had its own transitional provisions. It was unnecessary to consider sch 4, cl2 further, because the parties had agreed that LPUL did not apply.

    The ACL?

    Although the LPA applies to all lawyers’ bills while the ACL applies to bills for clients who are a ‘consumer’, there are a range of concerns about the interaction of the ACL and LPUL. The most immediately relevant concern is the different frameworks to protect consumers and itemised bills.

    The different frameworks to protect consumers

    LPUL, like the subsisting LPAs of the states and territories, continues to make costs disclosure the centrepiece of its framework to protect consumers. It relies on procedural fairness, testing the fairness of costs agreements by reference to the process by which they have been concluded. In contrast, the ACL, which sits alongside LPUL, tests the fairness of such agreements by reference to the fairness of their terms. This is a different test, one of substantive fairness, which is not only different but more onerous on lawyers and more sympathetic to consumers whose complaints LPUL seeks to reduce.[21]


    Itemised bills
    The ACL, like LPUL and the LPAs, deals with itemised bills. All three laws require the issue of an itemised bill if the client requests it. However, the time allowed for issuing a bill and the form of the bill required are different. Thus, LPUL and the LPAs allow 28 days, while s101 of the ACL allows only 7 days.

    The inconsistency in relation to consumer bills may be only partly resolved by provisions of state law like s55 of the Fair Trading Act 1989 (Qld). This section confirms that a legal practice has 28 days to provide an itemised bill. However, this applies only to legal practices subject to the operation of the ACL as a law of Queensland, and not as a law of the Commonwealth. [22]

    Roger Quick is a solicitor and Costs Assessor and the lead author of Quick on Costs (2nd edition), which will be completed early in 2017. PHONE: (07) 3366 2374 EMAIL: r_w_quick@hotmail.com

    .


    [1] This article uses the acronyms LPA’s to refer to the repealed Legal Profession Act 2004 ( NSW) and Legal Profession Act 2004 (Vic) unless it is necessary to distinguish between them. Similarly the acronym LPUL is used to refer to the text of LPUL contained in schedule 1 of the Victorian Application Act usually without distinguishing this from the version of the Legal Profession Uniform Law (NSW) to be found in the Legal Profession Uniform Law (NSW)(2014 No16a. The acronym LPUGR is used to refer to the Legal Profession Uniform General Rules. The acronym QC is used to refer to the 2nd Edition of Quick on Costs.

    [2] See LPUL pt 5.2, Complaints, pt 5.3, Consumer Matters, and pt 5.5 Compensation Orders.

    [3] See the disclosures required under s174 (2) and s 174(3) LPUL of a client’s rights to receive a bill and request an itemised bill and to seek the assistance of the relevant designated local regulatory authority in a dispute about legal costs.

    [4] See ss268-271 and s291 LPUL.

    [5] See pt 4.3 LPUL, Legal Costs.

    [6] See s172 (1) LPUL.

    [7] See eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd [2015] NSWCA 284 at [6]- [8],[53]-[64] and [117]-[124]. See also Templeton v ASIC [2015] FCAFC 137 at [30}-[33].

    [8] See, for example, Re Lamrock Brown & Hall; Ex parte Black [1908] ArgusLawRp 4; [1908] VLR 238 at 248-9.

    [9] These differences are explored in QC in the chapter ‘The regulation of practitioners’ beginning at [160.580].

    [10] See the post ‘The Costs Court’ 17 June 2010 by S Warne accessible at http://lawyerslawyer.net/2010/06/17/the-costs-court/. For further detail of the Court, see also:

    http://www.supremecourt.vic.gov.au/home/law+and+practice/areas+of+the+court/costs+court/

    For costs disputes where the client first instructed the solicitor on or after 1 July 2015 see: http://www.supremecourt.vic.gov.au/home/law+and+practice/areas+of+the+court/costs+court/costs+disputes+where+client+first+instructs.

    [11] The Uniform Rules may also define classes of commercial or government client. See reg 71 LPUGR.

    [12] See s181(1) LPUL for a definition of ‘conditional costs agreement’. Conditional Costs agreements are considered more fully in QC in the chapter in Vol 1 titled ‘Costs Agreements’ beginning at [150.220].

    [13] See in particular the analysis made of the meaning of the term interim bill by McGill DCJ in Turner v Mitchells Solicitors [2011] 61 at [3] and the acceptance of the decision in its entirety by Applegarth J in Tabtill No. 2 Pty Ltd v DLA Phillips Fox (a firm) [2012] QSC 115 at [66]. We owe the gloss as to the meaning of a final bill to the judgment of Mullins J in the Queensland Court of Appeal in Challen v Golder Associates Pty Ltd [2012QCA307 at [44]-[49].

    [14] Challen v Golder Associates Pty Ltd [2012] QCA 307 illustrates the difficulty of guessing how the court will exercise its discretions.

    [15] Ralph Hume Garry v Gwillim (CA) [2003] 1 WLR 510 at 522, the decision was cited with approval by Applegarth J in Tabtill No. 2 Pty Ltd & Ors v DLA Phillips Fox (a firm) & Anor [2012] QSC 115 at 82 and has been similarly cited elsewhere.

    [16] See, A Ashe, ‘Getting the most out of the Costs Assessment Process’ (2015) accessible at http://www.alysonashe.com.au/.

    [17] AFA’s are considered in detail in the chapter ‘The Future of the Law of Costs’ in Vol 1 of QC beginning at [170.550] where Table 1, Summary of Australian Alternative Fee Arrangements defines a method and gives an example of each method; evaluates each method as to when it should be considered and when it should not be considered; and its advantages and disadvantages.

    [18] The concept of LPM and techniques relating to it are considered in detail in the chapter ‘The Future of the Law of Costs’ in Vol 1 of QC beginning at [170.1180]. Short explanations of the concept include Post Draft Submission 270 to the Productivity Commission Access to Justice Arrangements Inquiry Report 3.12.2014 accessible at www.pc.gov.au › Inquiries › Completed inquiries ; and ‘Legal Project Management : Flying Forward’ accessible at insight.thomsonreuters.com.au /legal-project- management.

    [19] See Legal Profession Uniform Law (NSW) No 16a 2014, Schedule 4 Clause 18.

    [20] See Legal Profession Uniform Law (NSW) No 16a 2014 - Schedule 4 Clause 18)

    [21] See QC ,Vol 1 The Regulation of Practitioners, at [160.820] and [160.830]

    [22] See further the Queensland Legal Services Commissioner’s Regulatory Guide no7 ‘The Application of the Australian Consumer Law to Lawyers’ at para 4.7. The Guide is accessible at https://www.lsc.qld.gov.au/


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