Iw on Behalf of Add (Part of The Ade)/ v Sd of Adf

 
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[2012] NZLCRO 17

LCRO 1/2011

CONCERNING an application for review pursuant to section 193 of the Lawyers and Conveyancers Act 2006

AND

CONCERNING a determination of the Wellington Standards Committee 1

Between
IW on behalf of ADD (part of the ADE)
Applicant
and
SD of ADF
Respondent

In accordance with s.213 of the Lawyers and Conveyancers Act 2006 copies of this decision are to be provided to:

IW as the Applicant

SD as the Respondent

Wellington Standards Committee 1

The New Zealand Law Society

Law Practitioners — Application for review of a Standards Committee decision on a complaint of excessive fees and failure to notify of change in hourly rates – practitioner's law firm instructed by applicant in a litigation matter in March 2008 – used summer clerks to complete discovery on very tight timetable – significant amount of work undertaken – applicant complained bills were excessive and had not been notified of change in hourly rates of lawyers in breach of r3.6 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (requirement to update information provided) – whether costs were excessive – whether new retainer began with each separate part of a litigation proceedings – whether practitioner was in breach of any professional obligations by not providing notification of change in hourly rates charged.

Held: Discovery was central to the litigation process, and in a document-rich litigation discovery, it could be a fiscal burden. The applicant was appropriately advised about the nature of discovery and the fact that it was time-consuming and potentially expensive. The practitioner was conscious of the applicant's concerns, and kept the costs down by using summer clerks whose hourly charge rates were considerably less than experienced legal staff. The time spent and fees charged for carrying out the discovery process were not excessive.

Rule 3.10 was clear-cut in that r3.4 (advance information as to fees to be charged) and r3.5 (lawyer to provide copy of the client care and service information prior to undertaking significant work) did not apply to retainers entered into before 1 August 2008. A new retainer was not entered into on the happening of each separate part of the litigation process. The obligations contained in r3.4 and r3.5 were not required to be met if the retainer was pre 1 August 2008. The arrangement between the applicant and the practitioner was entered into before the Client Care Rules came into effect.

The practitioner's firm had sent a flyer to all its existing clients, including the applicant, which notified them that the firm's terms of engagement would change and that new terms would be effective from 1 August 2008, and that these could be downloaded from its named website. The firm had acted for the applicant for almost a decade, during which time he would have experienced annual fee rises. While not directly informing clients of cost increases was unhelpful to good client relations, it did not breach the professional standards applied in a pre 1 August 2008 matter. The applicant must have been aware of the practitioner's practice of regularly reviewing and increasing the charge out rates. The fees rendered were reasonable and there was no breach of professional obligations by the practitioner.

Application for review declined and decision of Standards Committee confirmed.

DECISION

The names and indentifying details of the parties in this decision have been changed.

Introduction
1

This is an application for review of a decision of the Wellington Standards Committee 1 which considered a complaint by IW on behalf of ADD (part of the ADE) (the Applicant) against SD of ADF (the Practitioner). The Standards Committee resolved to take no further action on the complaint and the Applicant seeks a review of that decision.

Background
2

The Practitioner's law practice has acted for the Applicant on various matters since 2003. In early March 2008 it was instructed to act in relation to proceedings arising from a property transaction involving the Applicant.

3

It appears that the Applicant had summary judgement entered against it by the vendor of the property but that this decision was successfully appealed in the Court of Appeal at which the Applicant was represented by senior counsel and another barrister. It further appears it was decided that for the substantive High Court proceedings senior counsel would be assisted by the Practitioner's firm.

4

A fairly tight timetable to deal with discovery and interlocutory applications was set in the High Court and immediately thereafter a staff member of the firm began work on the discovery process. A number of documents had to be provided by the Applicant and it seems that, despite one extension to the timetable being agreed between the parties, the documents from the Applicant were received by the Practitioner only one week before the (extended) deadline. This meant that the necessary work was undertaken over a weekend and sometimes until late at night. The Practitioner was aware of the Applicant's concerns over the cost of the proceedings and accordingly used summer clerks (being the most junior legally qualified staff in the office) to do much of the work under supervision.

5

The discovery work was completed and immediately thereafter an invoice was rendered for the firm's attendances for the period 27 November 2009 to 2 February 2010 in the sum of $25,684.00. With GST and administration costs the account totalled $29,616.86. The Applicant was unhappy with the size of the account and ultimately on 16 March 2010 filed a complaint with the New Zealand Law Society (NZLS) Complaints Service, alleging that the hours of work invoiced were “excessive for the work”. Also that “hourly rates (had) increased without notification, some by 33%”, and that “administration/secretary hours (had) been charged in addition to lawyers hourly rate”. The desired “outcome” was expressed as “a reduction in the amount payable to better reflect the work involved and in line with accepted hourly rates”

6

The Practitioner responded on 8 April 2010. His response included his understanding that the complaint also covered an invoice for professional services for the period 30 October 2009 to 26 November 2009 for a fee including GST of $7,265.25, which with disbursements totalled $8,365.25.

7

In summary the Practitioner's position was that “the invoices rendered (were) fair and reasonable in all of the circumstance of the proceeding”, that no “additional secretarial or administrative time had been charged to either bill”, and that the charge- out rates were appropriate. He explained the make-up of the firm's standard “administration fee” charge, and advised that clients were informed (on the reverse of every invoice) that hourly rates were reviewed and varied “from time to time”, thereby implying there was no lack of notification as claimed.

8

The Applicant took the opportunity to reply to the Practitioner's response, and shortly after a costs assessor was appointed by the Complaints Service to enquire into the two bills of costs.

9

The costs assessor looked at the overall fee and the charge-out rates and concluded that the overall fee was not excessive, nor did he consider the charge-out rates were excessive. He did however suggest that there may not have been a complaint had the firm specifically brought the increases in charge-out rates to the Applicant's attention.

Standards Committee determination
10

In its decision dated 16 November 2010 the Committee set out the specific complaints of the Applicant, summarised the Practitioner's response, the Applicant's reply (which had included the allegation that he had received no notification of the hourly rate review), and the costs assessor's report, and decided to take no further action (pursuant to section 152(2)(c) of the Lawyers and Conveyancers Act 2006 (the Act)). It did so for the following reasons: that the costs had been assessed as reasonable for the work done, that the work had been completed at an appropriate level, and that no dispute was now taken by the Applicant with the secretary/administration hours charged. This latter finding resulted from the costs assessment report noting that the complaint about administration/secretary charges was no longer being pursued by the Applicant. The Committee also noted that the Applicant's instructions were received before the Act came into force so by implication its provisions did not apply. There was no comment on the Practitioner's mode of notification to clients.

Application for review
11

In his application for review dated 24 December 2010 the Applicant “challenged” the Committee's decision. He maintained his position that the time spent (and therefore the costs charged) were not reasonable, suggesting that the cost assessor and the Committee “(did) not really look at the amount of work that was required…” He submitted that had the process been handled by a “competent lawyer” it would not have “taken as long as it did”.

12

It is observed that the Applicant went on to state that “the Committee noted that their (sic) view on the reasonableness of the bill was influenced by the fact that the job was urgent”. The Committee's decision is set out in the second to last paragraph headed “Determination” and summarised in paragraph [10] above. Nowhere in that summary of the reasons for its decision is “urgency” mentioned. The only reference to “urgency” in the determination appears to be under the heading...

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