!

Practical(Implementations(0(Different(Billing(Systems(((
The!advantages!and!disadvantages!!!
Billing&Type&
Time3cost&

The$lawyer$specifies$an$
hourly$rate$and$the$client$
agrees$to$pay$the$rate$
multiplied$by$how$many$
hours$the$task$takes$8$this$is$
the$dominant$billing$method$
in$practice$

Cost%Indemnity%Rule:%a$
winning$client$is$entitled$to$
have$their$reasonable%and%
necessary%costs$paid$by$the$
losing$party$&

Advantages&

Attractive$to$the$profession$because$
it$normally$results$in$higher$fees$
than$item$remuneration$$
Lawyers$feel$they$are$being$paid$for$
professional$advice,$not$a$product$

Firms$can$keep$track$of$individual$
lawyers$and$their$productivity$$

Australian$Lawyers$Values$Study$
showed$that$exposure$to$practice$
resulted$in$more$lawyers$resisting$
pressure$to$overcharge$their$clients$$$
$

Fixed&Fee&

Lawyer$agrees$to$complete$a$
task$for$a$set$amount$

Amounts$can$relate$to$
average,$historical,$market$
costs$
Value&Billing&

Defining$the$value$of$each$
step$of$the$process$with$the$
client,$ending$with$
calculation$of$a$fixed$fee$and$
estimates$for$potential$add8
ons&
Conditional&fees3cut&of&pie&

Lawyer$takes$a$percentage$of$
settlement$fee$if$client$is$
successful&

Prohibited$in$Australia&
Condition&feeds3uplift&fees&

Conditional%costs%agreements$
only$apply$when$the$client$in$
successful$

Uplift%Fees:%$practitioner$
charges$up$to$25%$of$their$
normal$fee$as$an$addition$or$
uplift&

Disadvantages&

Not$transparent$to$the$client$$unpredictability$
of$final$fee$is$inefficient$and$unfair.$$

Jim$Spigelman$describes$it$as$ethically$
indefensible$because$lawyers$are$not$rewarded$
for$efficiency$

Self8interest$and$error$can$result$in$high$working$
hours$and/or$fraudulent$timesheet$$

Lawyers$are$viewed$as$disposable$by$large$firms$

Creates$a$stressed$workplace$of$professional$
ambition$affecting$work8life$balance.$
Costs$not$able$to$be$tracked$
Risk$that$the$agreed$price$is$less$than$what$the$
work$is$worth,$leading$to$lawyers$preferring$
their$own$interest$over$the$clients$$
Not$based$on$results$$

Low$risk$of$under8compensation$$
Incentive$for$efficiency$
Low$fraud,$overcharging$or$over$
service$$
Is$predictable$and$objectively$
testable$
Removes$power$imbalance,$
facilitating$a$relationship$based$on$
communication$and$trust$
High$level$of$consumer$acceptance,$
low$chance$that$clients$will$dispute$
billing$practices$$

Makes$justice$more$accessible$and$
affordable$for$clients$(in$line$with$
adversarial$advocate,$ethics$of$care$
and$responsible$lawyering$models)%
$
Acts$as$compensation$for$lawyers$
taking$the$risk$on$a$no8win,$no8fee$
case%

Time$is$Money$mindset$deteriorates$Client$
Lawyer$relationship$

Costs$not$able$to$be$tracked$
Based$largely$on$the$clients$perception,$so$
subjective$determination$of$value$might$not$
align$with$the$lawyers$
High$fraud/overcharging/$over$service$risk$$
Nor$predictable$or$objectively$testable$$
Conflict$of$interest:$personal$interest$to$win$
case$may$conflict$with$lawyers$ability$to$advise$
client/$their$duty$to$the$court%
Prohibited$in$Australia$$
Not$permitted$to$enter$an$uplift$fee$agreement$
unless$the$lawyer$has$certified$there$is$
reasonable$prospects$of$success$$

$Campbell$&$S$Charlesworth$(2012)$Salaried$lawyers$and$billable$hours:$a$new$perspective$from$the$sociology$of$work$19(1)$International%Journal%of%the%
Legal%Profession%898$122$2.$$
D$Webb$(2010)$Killing$Time:$a$limited$defence$of$time8cost$billing$13(1)$Legal%Ethics%39$3.$$
!
Hon$Justice$Kirby,$Billable$Hours$in$a$Noble$Calling$(1996)$21$Alt%LJ%257.$
$

MONEY!
MATTERS!
ETHICAL!BILLING!AND!THE!CLIENT!
LAWYER!RELATIONSHIP!

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2

OVERVIEW!

The!adversarial!litigation!system!
creates!high!and!unpredictable!costs,!
putting!at!risk!fundamental!values!of!
fair!and!equal!access!to!justice.!Both!
lawyers!and!clients!are!uncertain!
about!what!is!fair,!reasonable!and!
accurate!billing,!and!as!a!result:!

80%!of!complaints!to!the!
OLSC!relate!to!overcharging!

60%!of!companies!
interviewed!in!a!report!by!
Australian!Corporation!
Lawyers!Association!in!2005!
were!seeking!alternatives!to!
the!current!billing!system!

Today,!lawyers!and!clients!prefer!the!
time2billing!system,!which!allocates!
work!items!in!time!frames!called!
billable!hours.!Clients!are!billed!in!
accordance!to!the!lawyers!rates!
multiplied!by!the!hours!required.!!!!

Reviewing(the(Range(of(Standards(and(Values(
Negotiating!Fair,!Reasonable,!and!Realistic!Cost!Agreements!!

Duncan&Webb,&Killing&time:&a&limited&defence&of&
time3cost&billing&
There$is$no$ideal$billing$system:$charging$
creates$constant$tension$between$the$lawyer$
and$client$relationship$due$to$the$different$
nature$of$their$interests$
Common$problems$across$ALL$billing$systems:$$

Fictitious$work/fraud:$Claiming$for$work$not$
completed$or$time$that$was$no$in$fact$spent$of$
a$clients$affairs$$
Gouging:$Overcharging$where$a$lawyer$takes$
advantage$of$some$weakness$or$ignorance$of$a$
client$
Skimming:$Temptation$for$the$lawyer$to$
assume$that,$even$though$work$is$routine$and$
low$(or$no)$risk,$it$is$proper$to$charge$a$
significantly$increased$amount$for$high8value$
work$
Ad$Hoc$Billing:$Needs$to$be$objective,$rational$
and$testable$but$is$often$unpredictable$and$
difficult$to$challenge$
Underservicing:$High$chance$in$a$fixed$fee$
system$and$time8based$system$$
Diluting$loyalty:$lawyer$liquidates$client8lawyer$
relationship$trust$into$money$

Have!the!Economics!of!the!
profession!killed!Idealism!

and!Selflessness!and!

The&issue&of&time3cost&billing&$

replaced!it!with!businesses!!
!Kirby!J,!Billable!Hours!in!a!Noble!
Calling?!

&

Conflict$of$interest$
Lack$of$predictability$for$the$client$
Blindness$to$the$value$of$the$services$
provided$
Lack$of$communication$
!

LPUL&172&Legal&costs&must&be&fair&and&reasonable&
(1)$A$law$practice$must,$in$charging$legal$costs,$charge$costs$that$
are$no$more$than$fair$and$reasonable$in$all$the$circumstances$
and$that$in$particular$are$
a) proportionately$and$reasonably$incurred;$and$
b) proportionate$and$reasonable$in$amount.$
(2)$In$considering$whether$legal$costs$satisfy$subsection$(1),$
regard$must$be$had$to$whether$the$legal$costs$reasonably$
reflect$$
a) the$level$of$skill,$experience,$specialisation$and$seniority$
of$the$lawyers$concerned;$and$
b) the$level$of$complexity,$novelty$or$difficulty$of$the$issues$
involved,$and$the$extent$to$which$the$matter$involved$a$
matter$of$public$interest;$and$
c)
the$labour$and$responsibility$involved;$and$
d) the$circumstances$in$acting$on$the$matter,$including$(for$
example)$any$or$all$of$the$following$
i.
the$urgency$of$the$matter;$$
ii.
the$time$spent$on$the$matter;$
iii.
the$time$when$business$was$
transacted$in$the$matter;$$
iv.
the$place$where$business$was$
transacted$in$the$matter;$
v.
$the$number$and$importance$of$any$
documents$involved;$and$
e) the$quality$of$the$work$done;$and$
f)
the$retainer$and$the$instructions$(express$or$implied)$
given$in$the$matter.!
!
LPUL&174&Disclosure&obligations&of&law&practice&regarding&
clients&
(1)$$Main$disclosure$requirement.$A$law$practice$must$
a) As$soon$as$practicable$after$instructions$are$given,$
provide&the&client&with&information&disclosing&the&
basis&on&which&legal&costs&will&be&calculated&and$an$
estimate$of$the$total$legal$costs;$and$
b) As$soon$as$practicable$after$there$is$any$significant$
change$to$anything$previously$disclosed,$provide&the&
client&with&information&disclosing&the&change$to$the$
legal$costs$$
(3)$$Clients$consent$and$understanding$
If$a$disclosure$is$made$under$subsection$(1),$the&law&practice&
must&take&all&reasonable&steps&to&satisfy&itself&that&the&client&
has&understood$and$given$consent$to$the$proposed$course$of$
action$and$costs.$