New Zealand Law Society - Charged more than a ‘fair and reasonable fee’

Charged more than a ‘fair and reasonable fee’

Published on 12 May 2020

[All names used are fictitious]  

A lawyers standards committee has made a finding of unsatisfactory conduct against a lawyer who charged more than twice what a cost assessor considered a fair and reasonable fee.

The committee fined the lawyer, Edinburgh, $8,000 and ordered her to pay $1,000 costs.

The conduct was, in its view, at the “upper end of unsatisfactory conduct”, the committee said.

Mr and Mrs N controlled a farming company. After a crop was sprayed and subsequently died, the company instructed Edinburgh to pursue a claim against the spraying company.

The firm Edinburgh works for billed approximately $73,000 plus GST and disbursements for the spraying claim, which was advanced to the point of sending a letter of demand to the spraying company.

The firm also provided advice in relation to insurance and earthquake claims for two properties; invoices for that work and the spraying claim totalled approximately $90,500.

The standards committee considering the complaint appointed a costs assessor.

The cost assessor noted that Edinburgh’s hourly rate was $700 plus GST and an hourly rate of $200 plus GST for a junior lawyer working on the file.

The costs assessor considered a reasonable charge-out rate for Edinburgh’s work was $500 an hour. That was based on an assessment of what other senior litigation practitioners in the local area, and national law firms, applied as their hourly charge-out rate.

Charge-out rate not disclosed from outset

In addition, it was also “most unfortunate” that Edinburgh’s charge-out rate of $700 was not disclosed to Mr and Mrs N from the outset and well before the bills became disputed, the costs assessor said.

Noting that the junior lawyer had done the bulk of the work, the costs assessor observed that all the time recorded by the junior lawyer had been charged without any reduction made whatsoever.

“Any senior lawyer who employs junior lawyers to assist them, must supervise their work in a competent fashion and carefully scrutinise any time recorded against the value of the work undertaken and what is proposed to be charged,” the committee said.

“A useful yardstick is to calculate the time that an experienced practitioner would have taken to complete the work required and then contrast that with the time recorded and the work actually undertaken.”

As the cost assessor noted in his report, it was “quite extraordinary” to have charged such a fee for a case where proceedings had not been issued and no hearing (interlocutory or otherwise) had occurred, the committee said.

The costs assessor assessed a reasonable fee as being approximately $37,500.

A lawyer responding on behalf of the firm Edinburgh works for accepted that in all the circumstances, the fees rendered could not stand.

“It is to the significant credit of [Edinburgh and her firm] that they have accepted the recommendations and conclusions in the costs assessor’s report and taken affirmative action,” the committee said.

“They have written off all of the unbilled work, provided credit notes and reduced the accounts rendered by approximately $28,500.”

The total fees have been reduced to approximately $37,500 and the firm has sent Mr and Mrs N a cheque for approximately $28,500.

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