Are your current billing practices potentially misleading?

Examples of potentially misleading practices include:

• conflating an “agency fee” or other firm charges with a disbursement such as a LINZ fee when there is no agent;
• charging an additional fee (such as an agency fee) whether or not recorded as a disbursement when there has been no disclosure of this in your terms of engagement; and
• describing a bureau/office service fee or expense recovery which is not an actual cost to the practice as a disbursement. Any actual disbursement such as an identifiable courier charge may be listed as a disbursement (see below).

The Law Society has previously published articles disapproving of these practices and the Property Law Section’s Property Transactions and E-dealing Practice Guidelines include similar advice.

Such a practice can breach a number of the Lawyers and Conveyancers Act (Lawyers: Rules of Conduct and Client Care) 2008. These might include:

• rule 3.4(a) providing advance information of the basis on which fees will be charged;
• rule 9 principles of charging; and
• rule 11.1 misleading or deceptive practice.

Tribunal decision

One such matter was recently referred by a lawyers standards committee to the New Zealand Lawyers and Conveyancers Disciplinary Tribunal. The lawyer admitted a charge of unsatisfactory conduct. The lawyer was censured, ordered to refund the fees, apologise to the clients, undertake practical training or education and pay costs.

The Tribunal commented that the sums involved justified the committee referring the charges to the Tribunal (Canterbury Westland Standards Committee v P Currie [2015] NZLCDT 15).

In general the theme when carrying out billing is to be open and transparent.

Disclosure

If a firm operates a separate agency firm that is related to the law firm this must be disclosed in the client care information provided prior to undertaking work. A copy of the invoice rendered by the related entity should be attached to the bill of costs shown as a disbursement including a breakdown of the agency/disbursement components. If the agency firm is not related to the law firm the same practice should apply.

Disbursements

A disbursement is a payment to a third party and billed to the client as charged to the law practice. An identifiable disbursement should be included only if it is reasonably and properly incurred or expected in relation to the transaction.

A bureau/office service fee or expense recovery is not considered to be a disbursement and therefore should be separately disclosed in the terms of engagement and not included in the bill of costs under a “disbursement” heading. Included in this category may be expenses such as internal photocopying, tolls, faxes etc not readily identifiable as an external payment.

If bureau/office service fees or expense recoveries are to be individually listed then they should be listed under a heading “Expense Recoveries” and adequately explained in the terms of engagement.

Including as an expense recovery a proportion of an external fee payable by the law practice such as an insurance premium or a Landonline licence fee should be avoided as it would be expected to form part of a lawyer’s hourly rate. Any such additional fee should at the very least be fully disclosed in the terms of engagement.

If your firm’s billing does not accord with the above principles, you should give immediate consideration to rectifying your billing practice. If you need any guidance please contact the Acting Inspectorate Manager Lisa Attrill, email lisa.attrill@lawsociety.org.nz, phone 04 463 2916.

An example of a suggested bill of costs: