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Sterling Law sets leading precedent on itemised bills

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With its latest big win, Sterling Law is establishing its place as an elite Queensland litigation firm, and a force to be reckoned with.

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The facts

When Joanne Murdock deliberately remained uncontactable to her solicitors for an extended period of time, she received a bill from them for all the work they had done for her.

The bill set out the charges item by item, particularising the date, the time spent and the person who performed the work, but for most items only provided very concise descriptions of the work performed. Examples later complained of included “attendance with you”, and “telephone attendance with you”.

Nearly a month later, Joanne Murdock saw another firm named Whitehead Crowther Lawyers for advice on the bill. They wrote to her former solicitors requesting “a bill in itemised format prepared in accordance with the law society rules (sic)”. Because of Joanne Murdock’s failure to make any part payment, secure the costs of her former solicitors or even accept instructions for service, her former solicitors commenced proceedings in the Magistrates Court of Queensland for recovery of their fees and disbursements.

A few months later, her former solicitors obtained summary judgment at a hearing before Magistrate Noel Nunan, who also refused to order a costs assessment.

Joanne Murdock then appealed this decision, appointing Rose Litigation Lawyers to do so. Rose Litigation Lawyers filed a Notice of Appeal, in summary contending that Magistrate Nunan had erred in finding the bill was an itemised bill and for refusing to order a costs assessment.

Legal Profession Act 2007 (Qld)

Section 300 of the Legal Profession Act 2007 (Qld) defines the following terms:

“itemised bill” means a bill stating, in detail, how the legal costs are made up in a way that would allow the legal costs to be assessed under division 7.

“lump sum bill” means a bill that describes the legal services to which it relates and specifies the total amount of the legal costs.

Section 332 of the Legal Profession Act 2007 (Qld) relevantly provides that:

332 Request for itemised bill

(1) If a bill is given by a law practice in the form of a lump sum bill, any person who is entitled to apply for an assessment of the legal costs to which the bill relates may request the law practice to give the person an itemised bill.

A bill in the form of a lump sum bill includes a bill other than an itemised bill.

(2) The law practice must comply with the request within 28 days after the date on which the request is made.

(5) If the person makes a request for an itemised bill within 30 days after receiving the lump sum bill, the law practice must not commence proceedings to recover the legal costs from the person until 30 days after complying with the request.

The Legal Profession Act 2007 (and the many statutes before it) provides for a process where an independent person known as a costs assessor goes through a lawyer’s bill and decides which charges on a bill are fair and reasonable, and should be allowed. This process is known as a costs assessment, and is primarily intended to protect clients of solicitors.  Section 335 of the Legal Profession Act 2007 (Qld) relevantly provides that:

335 Application by clients or third party payers for costs assessment

(1) A client may apply for an assessment of the whole or any part of legal costs.

(10) Subject to this section, a costs application under subsection (1) or (2) must be made in the way provided under the Uniform Civil Procedure Rules.

Uniform Civil Procedure Rules 1999

Rule 740 of the Uniform Civil Procedure Rules 1999 relevantly provides that:

(1) After a certificate of assessment is filed, the registrar of the court must make the appropriate order having regard to the certificate.

(2) The order takes effect as a judgment of the court.

Rule 743A of the Uniform Civil Procedure Rules 1999 relevantly provides that:

743A Application for costs assessment

(1) A person applying for a costs assessment must apply to the relevant court.

(2) The application must—

(a) be in the approved form; and

(b) state the names of any persons to whom notice must be given under the Legal Profession Act 2007, section 339 (1); and

(c) if practicable—

(i) nominate a particular costs assessor for the assessment; and

(ii) state the applicable hourly rate of the nominated costs assessor; and

(d) be accompanied by the following—

(i) an affidavit;

(ii) if applicable, the nominated costs assessor’s consent to appointment to carry out the costs assessment and confirmation that, if appointed, there would be no conflict of interest;

(iii) the prescribed fee.

(3) If the applicant has an itemised bill for all of the costs to be assessed under the application, a copy of the itemised bill must be an exhibit to the affidavit.

(4) If the applicant does not have an itemised bill for all of the costs to be assessed under the application, the best information the applicant has as to the costs to be assessed must be included in the affidavit.

(5) The affidavit must also—

(a) state whether the applicant disputes or requires assessment of all or what part of the costs; and

(b) if the applicant disputes all or part of the costs, state the grounds on which the applicant disputes the amount of the costs or liability to pay them.

Relevant Case Law

In Keene v Ward [1849] EngR 1210, The Queen’s Bench held that a solicitor’s bill must contain sufficient information for him to obtain advice about taxation, but that an exactness of form was not required.

In Cook v Gillard [1852] EngR 942, the House of Lords held that a solicitor’s bill which failed to specify in which Court the business was done was still valid, as such information would presumably already be within the knowledge of the client.

In Haigh v Ousey (1857) 7 El. & Bl. 578 119EngRep, it was held that the question of whether a bill was sufficient for a client to be advised about whether to seek taxation of the solicitor’s costs depended on what further information the client was able to tell their advisors about the charges.

In Clayton Utz Lawyers v P & W Enterprises Pty Ltd [2011] QDC 5, Judge Reid of the District Court of Queensland held that the generalised and incomplete descriptions of the work in the bills provided by the law firm were not itemised bills within the meaning of the Legal Profession Act 2007 as they provided “a wholly inadequate explanation of the work actually performed”. Consequently, the law firm was ordered to deliver itemised bills.

On the other hand, in Pott v Clayton Utz [2012] QSC 167 it was held by the Supreme Court of Queensland that the client has an onus to show what further information they require to get advice about applying for a cost assessment, otherwise the solicitor’s bills would be presumed to be itemised bills, and that merely swearing to a generalised concern of overcharging is insufficient to discharge this onus.

Decision of the District Court

At the hearing, Judge Porter QC immediately identified that the central issue of the appeal was whether the bill provided was an itemised bill within the meaning of the Legal Profession Act 2007, as all of the grounds of appeal depended on the bill being found to not be an itemised bill. His Honour also correctly noted that the central problem for Joanne Murdock was that she had not sworn any affidavit in the Magistrates Court proceedings concerning the extent of her knowledge of the charges contained in the bill. An adjournment application to adduce fresh evidence at the hearing was dismissed ex tempore.

Whilst Judge Porter QC held that a proper request for an itemised bill had been made within 30 days as required to enliven the prohibition on suing in section 332(5) of the Legal Profession Act, he also held that the bill was an itemised bill, and therefore there was no prohibition on the law practice commencing recovery proceedings when it did. The reasons why the bill was an itemised bill were because it specifically identified all the work performed and the names of other persons involved, most of the unparticularised attendances involved relatively short periods of time, and that Joanne Murdock would be expected to know much about the work performed for her. In any event, the absence of evidence by Joanne Murdock as to the extent of her knowledge meant that she had failed to discharge the onus of showing she did not have sufficient information to obtain advice about the bill.

Judge Porter QC rejected other arguments in support of the appeal, including that Magistrate Nunan should have ordered a costs assessment, that the terms of the mandatory costs disclosure provided to Joanne Murdock formed a part of the contract between herself and the firm, and that the Defence filed for Joanne Murdock constituted evidence of the truth of its contents because it was exhibited to an affidavit filed by the firm.

Because there was no error on the part of Magistrate Nunan, the appeal was dismissed with costs.

Conclusion

This case is the latest in a long case history of clients being sued for outstanding fees complaining about the sufficiency of the contents of the bill in order to avoid judgment being entered or standing against them. Applying the established principles derived from the case law, the District Court held that the client had failed to discharge her onus to show that the bill was not an itemised bill, because she had not provided any evidence of the extent of her knowledge of the work done for her. As a result, the appeal had to be dismissed.

This case again shows how whether a bill is sufficient will vary from case to case, depending on the client’s own knowledge or presumed knowledge. The (common) view that it is only the information that is contained on the face of the bill itself that matters is erroneous, because the test is whether another solicitor can provide advice based on the contents of bill supplemented by the client’s own knowledge of the matter. It is only when the sum of these two factors still means that the client cannot make an informed decision of whether to seek a costs assessment that the bill can be deemed inadequate and (upon a proper request) the prohibition on the law firm suing provided in section 332(5) of the Legal Profession Act applies.

 

Why lawyers are so expensive

Posted on Categories Legal profession, Professional feesTags , , , 1 Comment on Why lawyers are so expensive

Most complaints about lawyers concern how high their legal fees are. The professional fees charged by lawyers are notorious. When many clients earn an average of $20-40 per hour, it can seem unfair that your lawyers charge you hundreds of dollars per hour. However, as this article will demonstrate, there are reasons why legal fees are so high.

Operating costs

The main reason legal fees are so high is because it costs a lot of money to lawfully run and operate a law firm. Law firms incur all of the costs normally associated with operating an office (rent, wages, photocopy leases, furniture, power, stationary, paper, ink, tax etc). Inner city law firms pay massive amounts of rent and of course this cost gets passed onto you. Additionally, there are extra costs that law firms have to pay, mainly because the legal profession is so highly regulated.

In addition to normal business costs, lawyers also incur the following costs:

Professional indemnity insurance – this is liability insurance that all law practices are required to have. The costs of this depends on the size of the practice, but it is invariably expensive. This insurance is ultimately to the clients’ benefit, as it ensures that in cases where lawyers make mistakes, clients can be compensated for this.

Practicing certificate fees – lawyers also must pay thousands of dollars every year to the Law Society in order to renew their practicing certificates. The cost of a practicing certificate depends on the type of certificate which is granted. Included in the cost of a practicing certificate is a fidelity fund contribution fee of several hundred dollars in order to reimburse clients who are defrauded of money by a small number of unscrupulous members of the profession.

Continuing Professional Development – every year, lawyers are required to complete 10 points CPD as part of their continuing legal education. This typically costs thousands of dollars per practitioner as the seminars/courses that must be attended or undertaken are rather dear. Lawyers can be severely disciplined for not complying with the above requirements. Because a solicitor’s time is worth a lot of money, the monies spent on CPD are arguably small compared to the time expended on CPD which could be used on chargeable activities.

Trust account expenses – most firms hold at least one trust account, which is a bank account where monies which do not belong to the firm are deposited. Examples of trust monies include funds used for paying house deposits or outlays, and monies paid upfront by clients or third party payers on account of the firm’s professional fees. Firms have to pay for annual external audits of their trust accounts, which usually cost a minimum of $1,500.  Firms also have to deposit 2/3 of the lowest balance held in their general trust account of the previous year into a separate account. In addition, firms can be audited by the Queensland Law Society, with the costs of such audit being passed onto them.  And of course, banks impose monthly account keeping and other fees on solicitors’ trust accounts.  Finally, the costs of keeping and maintaining records, including trust accounting software and the time spent by members of the firm also add up.

As a result, the financial costs of practicing law are enormous. There are however other reasons why legal fees are high.

Demanding occupation

Being a lawyer is one of the most demanding occupations. Lawyers have to negotiate competing demands placed on them by their clients, the courts, their employers, disciplinary bodies and their families. Some clients are difficult or have unrealistic expectations, and this ensures that they walk away unhappy with their lawyer, even when their lawyer has done an OK job.

The law is a competitive, adversarial and aggressive environment. Lawyers typically are required to work long hours, including sometimes on weekends. The consequences of mistakes and failures can be severe, including embarrassment, loss of reputation, being sued and even being disciplined.

As a result of these pressures, lawyers are one of the occupations whose members most prone to suffering depression.

For these reasons it is unsurprising that lawyers expect to be adequately compensated for the work they do.

Becoming a lawyer

The process of becoming a lawyer is a long and expensive one. The reality is that lawyers become qualified and eligible for practice at enormous personal and financial cost.

Lawyers have typically gone to university for many years in order to obtain a law degree and have then undertaken a diploma in legal practice in order to become a solicitor, or undergone training and mentoring to become a barrister. Before being able to practice law, they must be admitted to the legal profession. This is an expensive and time-consuming process which involves paying a large fee to the Legal Admissions Board, and filing an application and affidavit in the Supreme Court.

Even when they are admitted to the profession and commence legal practice, it takes years before a lawyer becomes sufficiently experienced and knowledgeable to practice without any supervision.

Conclusion

Put simply, lawyers are so expensive because the financial and other costs of practicing law are enormous. Many of these costs are due to the onerous regulation of the profession. The costs of legal practice inevitably must be passed onto the legal consumer, ie the client.

The good news is that clients can minimise their legal fees, as this article explains.

How you can save on legal fees

Posted on Categories Legal profession, Professional feesTags , , 2 Comments on How you can save on legal fees

This post discussed why legal fees tend to be so high. The good news is that as a client there are a number of ways you can reduce your legal fees, as the rest of this article will show.
Continue reading “How you can save on legal fees”

Why are lawyers so expensive?

Posted on Categories Legal profession, Professional fees, Queensland Law SocietyLeave a comment on Why are lawyers so expensive?

Most complaints about lawyers concern how high their legal fees are. The professional fees charged by lawyers are notorious. When many clients earn an average of $20-40 per hour, it can seem unfair that your lawyers charge you hundreds of dollars per hour. However, as this article will demonstrate, there are reasons why legal fees are so high.
Continue reading “Why are lawyers so expensive?”

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