LAWYERS CHARGING and ACCESS TO JUSTICE G E Dal Pont 1
Access to justice meaning? justice = the upholding of rights, and the punishment of wrongs, by the law access to legal services / lawyers? 2
Barriers to accessing justice knowledge? distrust? geography? conflicts rules? cost? 3
Cost and competition policy the market for legal services theory: increasing competition places downward pressure on cost vs traditional view: the member of a profession does not regard himself as in competition with his professional brethren, and is not bartering his services as is the artisan nor exchanging the products of his skill and learning as the farmer sells wheat or corn 4
Impact of competition policy application of anti-competitive TPA provisions advertising removal of barriers to performing legal work broadening of available practice structures increasing number of law schools / lawyers 5
Result? legal practice viewed by regulators as any other business? has this generated a more mercantile (profit-oriented) approach to practice? if the price for legal services is set by the competitive market, should the profession be targeted as part of the access to justice problem? 6
Is competition the answer? pricing some consumers out of the market? need for governmental interference with the free market (funding or subsidy?) cf medical / health field - role for health professions to reduce or restructure fees to increase access to wellness? 7
Application to legal services no net increase in government funding / subsidy general law / statute does not reduce public expectations of the profession: eg fiduciary duties eg setting aside costs agreements eg extensive costs disclosure duties eg review of bills via taxation / assessment Effect: place downward pressure on costs? 8
Is the profession the problem? evidence of greater real cost for clients who access to justice is marginal? evidence of greater real profits for lawyers? evidence of increased genuine complaints of overcharging? vs change in societal attitudes / expectations? vs increasing legal rights? vs reduction in government funding / subsidy? vs increasing gap between rich and poor? 9
Profession s charging practices as an impediment to access to justice? 1. time charging? [the] cost of justice had now put the court out of the reach of the bulk of Australians There are a number of reasons for it. One of them is time charging by lawyers (McHugh J) 2. statutory restrictions on innovative charging approaches directed to improving access to justice? the uplift fee - Equuscorp v WFW 10
TIME CHARGING popularity - why? expected? well understood? consistent with user pays mentality? time is money 11
TIME CHARGING (cont) if a law firm simply counts the number of hours spent and sends a bill for that amount, perhaps there isn t a great difference between the law firm, on the one hand, and the office supply vendor who simply counts the number of pencils furnished and sends a bill for that amount, on the other 12
Criticisms of time charging promotes inefficiency and incompetence? distinct potential to result in overcharging? fails to discriminate regarding type of work done (or skill)? raises conflict between interest and duty? (see Re Morris Fletcher & Cross Bill of Costs [1997] 2 Qd R 228) 13
Fixed-fee / task-based charging the ethical response / answer? encourage what forms of lawyer behaviour? guard against client paying too much? masking the nature and scope of work? promote an even more mercantile approach? 14
Value billing? the OLSC has concluded that an approach to costing which might be called value billing, or flexible fixed-fee billing, can offer practitioners a valuable tool in both setting the costs of their service, and building better relationships with their clients. Value billing is based on establishing strong communication with the client and acknowledging the importance of this relationship, which is in the interests of both parties. It is not about negotiating a discount, but about billing work based on the value of that work to the client and the practitioner. 15
Value billing (cont) lawyer to gauge the client s expectations about the representation, exploring the client s hopes and expected outcomes, to reveal the value to the client of achieving their particular objective? how does equating fee and value impact on access to justice? (do the overcharged subsidise the undercharged? ) 16
Upshot? is value billing or fixed-fee / task-based charging likely to improve access to justice? NB price remains determined by the competitive market what is the real issue? client understanding / empowerment? reduction in expectation gaps? Query: are the clients best positioned to negotiate fee agreements unlikely to be hampered by access to justice limitations? 17
Uplift fees and access to justice judicial endorsement of speculative fees statutory response, eg LPA 1996 (Vic) s 97 how to address risk of no fee? trust the competitive market? vs concerns re (i) encouraging litigation (s 97(5)), (ii) tempering lawyer greed (s 98 see next slide) 18
Statutory restriction on uplift fees A conditional costs agreement may provide for the payment of a premium on the legal costs otherwise payable under the agreement on the successful outcome of the matter in respect of which the agreement is made. (s 98(1)) The premium must be a specified percentage of the legal costs otherwise payable, and must be separately identified in the agreement. (s 98(2)) A legal practitioner or firm must not enter into a conditional costs agreement under which a premium, other than a specified percentage not exceeding 25% of the costs otherwise payable, is payable on the successful outcome of any matter involving litigation. (s 98(3)) 19
Consequences of s 98(3) breach criminal penalty (s 98(3)) costs agreement void (s 102(1)) lawyer disentitled from recovering any amount for legal services provided (s 102(3)) [NB change in 2004 Act] 20
Equuscorp v WFW (No 4) [2006] VSC 28 costs agreement: normal rate of $400 per hour; discount rate of $66 per hour normal rate chargeable only when and where a successful result achieved = conditional costs agreement (s 97) did it contravene s 98? 21
Equuscorp - WFW s argument A liability to pay fees at the normal rate was always the expectation of the parties for they always contemplated a successful outcome. The effect of the deed of costs, therefore, was as Mr Russo [the director of the plaintiff] wished; there was to be a monthly payment of fees at a reduced rate which was on account of fees at the full rate which would be paid later. In this way the deed of costs has the consequence, in the event of unsuccessful outcome, of reducing the fees otherwise payable rather than that of providing for a premium in the event of success. ([2006] VSC 28 at [11]; emphasis supplied) 22
Equuscorp - Byrne J s decision s 98 is directed, not so much to the expectations of the parties, but to the agreement which they have entered into (at [12]) under the agreement legal fees at the normal rate are to be chargeable only where there is a successful result [such that] absent a successful result the legal fees of WFW are to be at the discount rate (at [15]) hence the clear and very severe consequences of s 102(3) applied 23
Impact of Equuscorp? call into question legitimacy of all no win, no fee agreements? My feeling is that it will have a terrible effect for lawyers and for people desperate to access justice but without the means to do it (Partner in WFW) The law ought to facilitate agreements between solicitors and their clients that improve access to justice, not make it harder (then LIV president) 24
Query re Equuscorp? client = experienced professional litigator and in a position to bargain for agreement reflects its objectives client wanted a fee agreement under which [it] would pay as little as possible by way of upfront fees and to pay the balance of the agreed fees later from the cash-flow to be generated by the litigation (at [10]) anything objectionable in public policy in the Equuscorp agreement? does the Equuscorp scenario provide an example of the mischief to which s 98 is directed? form over substance result avoidable by phrasing the agreement differently? 25
So? competitive market sets pricing? NB justice has a cost the market cannot meet everyone s access to justice need primary focus on lawyer charging practices potentially misdirected? lawyers monopoly on legal services justifies some role in promoting access to justice but is blunt instrument of prescription or prohibition the answer? can the profession be trusted in this regard? is the practitioner s sense of professional responsibility a sufficient control? 26