Unsatisfactory conduct: Contingency fee arrangements must be in writing
This is a summary of a decision by a Lawyers Standards Committee under the Lawyers and Conveyancers Act 2006. This summary was published in LawTalk 782, 7 October 2011.
Lawyers must provide their clients in advance with written information about the basis for charging fees, and any contingency fee agreement must be in writing (Conduct and Client Care Rules, Rules 3.4 and 9.10).
A lawyer who breached these and other requirements was found guilty of unsatisfactory conduct by a Lawyers Standards Committee, fined $1,500 and his fee was reduced.
A client had complained that the lawyer had never told her how costs would be determined in her constructive dismissal case. He had said only: “Of course we will work something out”, or words to that effect.
After the case was settled, the lawyer emailed her that he would take 25% of the settlement amount, plus $3,000 (including GST) that had been included in the settlement for legal costs, for a total fee of $9,970.
The lawyer told the committee he had acted for the client in another employment matter about three months earlier and in that case they had agreed he would be paid 33% of her settlement. This was his standard arrangement in these types of employment cases, he said, and the client would have been aware it would be the same for the new case.
In fact she had specifically asked for a contingency arrangement, and he had agreed to 25%. The lawyer also said the $3,000 included in the settlement was not part of his contingency fee.
The committee found that the lawyer had failed to provide fees estimates and other client service information in advance, as required by Rule 3.4. Contingency fee agreements must also be in writing and must include specific information, such as the condition or conditions that will amount to success, whether there are any fees or expenses for which the client will be liable regardless of whether the case succeeds, and how the fee is to be determined if the other side offers a settlement or compromise that the client rejects against the lawyer’s advice (Rule 9.10).
The committee said the lawyer had a duty to keep the client informed, provide invoices, and progress matters in a timely way, but he had failed to do this. The lawyer had also failed to respond with respect and courtesy when the client had asked about the lack of information, breaching Rule 3.1.
The committee reduced the lawyer’s fee to $3,000 including GST, the amount provided for in the client’s settlement. As well as the fine, the committee ordered him to pay $750 costs to the Law Society.