New Zealand Law Society - Open and Transparent Billing

Open and Transparent Billing

Charging certain fees or disbursements when billing may be unlawful or misleading. Therefore, it is important to be up front with how you are billing and what you are billing for. Below are the Law Society’s principles for open and transparent billing with respect to disclosure and disbursements.

The lawyers’ Rules for Conduct and Client Care state “a lawyer must not charge a client more than a fee that is fair and reasonable for the services provided, having regard to the interests of both client and lawyer.” Factors considered reasonable in making up a fee include but are not limited to:

  • time and labour,
  • skill knowledge and responsibility required to perform the services properly,
  • circumstances of urgency and any relevant time limitations,
  • complexity of the matter,
  • experience and ability of the lawyer(s) involved,
  • reasonable costs of running a practice.

However, some fees or disbursements may not be able to be claimed or charged for and are therefore 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 recorded as a disbursement or not, when there has been no disclosure of this in your terms of engagement; and
  • describing an 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).

Such a practice can breach sections 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.

By way of example, Canterbury Westland Standards Committee v P Currie [2015] NZLCDT 15 emphasises the necessity to be open and transparent when billing. In this case, the lawyer admitted a charge of unsatisfactory conduct and 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.

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.

The New Zealand Law Society Property Law Section's Property Transactions and E-dealing Practice Guidelines includes guidance for disclosure in a closing statement, particularly with relation to charging fees relative to the operation of a Trust Account.

For every transaction where funds have passed through your law practice's trust account, you must provide the client with a complete and understandable statement of all trust money handled for the client, all transactions in the client’s account and the balance of the client’s account (if any). This statement should accompany your report to the client.

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.

An 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 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 consider rectifying this.

An example of a suggested bill of costs:

Example of an invoice
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