New Zealand Law Society - Lawyers Complaints Service: Percentage billing inappropriate

Lawyers Complaints Service: Percentage billing inappropriate

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A lawyers standards committee has ordered a lawyer, B, who invoiced an estate $22,754.68 on a “percentage of the estate” billing method, to reduce his legal fees to $6,000 plus GST and disbursements.

The estate was not very high value nor did the standards committee consider it a complex or difficult estate.

“The fees should therefore reflect this.”

There were only two estate assets to deal with – funds in one bank account and the proceeds of a property sale and there was only one beneficiary. The fees charged for the sale were separate and not included in the complaint.

The $22,754.68 fee B charged “shows the stark inappropriateness of adopting a pure percentage-based billing method as the fees charged have no bearing on what is considered to be a fair and reasonable fee,” the committee said.

“As such, the committee has accepted the recommendation set out in the cost assessor’s report that a fair and reasonable fee for the administration of the estate is $6,000 plus GST.”

Unsatisfactory conduct

The committee found unsatisfactory conduct by B, for charging fees that were unfair and unreasonable.

The daughter of the deceased, who had been granted Letters of Administration in the estate, complained to the Lawyers Complaints Service about the fees B charged in administering the estate. Subsequently, the parties advised the Lawyers Complaints Service that the matter had been satisfactorily resolved and that the complaint had been withdrawn.

The committee noted that regardless of whether the complaint had been resolved and the parties had entered into an agreement, the fees charged still had to be reasonable in terms of rule 9 of the Rules of Conduct and Client Care.

The committee said it also noted that it was part of its role to protect the consumer, regardless of whether the parties had reached a settlement.

It therefore decided to continue to deal with the complaint, sought a cost assessors’ report and then made orders following its review of the case.

The committee noted the generally considerable difficulties with imposing a flat percentage surcharge on an estate, as identified in both Court and LCRO decisions.

“In assessing whether a fee is fair and reasonable, it is also necessary to undertake a global assessment of the fee and to ‘stand back’ and determine whether in all of the circumstances, the fees are fair and reasonable.

“In this instance, the committee does not consider that [B] has done so,” the committee said.

As well as ordering B to reduce his fees, the committee ordered him to pay $750 costs.

Dangers involved

The committee further ordered publication of the facts of the case “to make lawyers aware of the dangers involved with adopting a percentage-based approach and to serve as a reminder to lawyers of the reasonable fee factors to be taken into account when assessing the reasonableness of the fees charged.”

The factors a lawyer must take into account when setting fees are set out in rule 9.1 of the Rules of Conduct and Client Care. The reasonable fee factors listed in rule 9.1 are:

  • the time and labour expended;
  • the skill, specialised knowledge, and responsibility required to perform the services properly;
  • the importance of the matter to the client and the results achieved;
  • the urgency and circumstances in which the matter is undertaken and any time limitations imposed, including those imposed by the client;
  • the degree of risk assumed by the lawyer in undertaking the services, including the amount or value of any property involved;
  • the complexity of the matter and the difficulty or novelty of the questions involved;
  • the experience, reputation, and ability of the lawyer;
  • the possibility that the acceptance of the particular retainer will preclude engagement of the lawyer by other clients;
  • whether the fee is fixed or conditional (whether in litigation or otherwise);
  • any quote or estimate of fees given by the lawyer;
  • any fee agreement (including a conditional fee agreement) entered into between the lawyer and client;
  • the reasonable costs of running a practice; and
  • the fee customarily charged in the market and locality for similar legal services.
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