I mentioned the case of Sydney law firm Keddies in passing in a post on solicitors’ work hours. Keddies is being sued by former clients who allege that they were overcharged (including being charged for reading “thank you” letters. The SMH reports:
The profession’s watchdog, the Office of the Legal Services Commissioner, is investigating numerous complaints by clients against Keddies. The firm, which made 14 staff including five lawyers redundant this week, maintains it has done nothing wrong and is confident the commissioner will dismiss all the complaints.
The commissioner, Steve Mark, is unable to comment on any cases before the commission but he said he would welcome any proposed changes as the present billing system was not working.
“The whole costing regime for the legal profession needs to be reviewed,” Mr Mark said. Everything from cost assessment, gross overcharging and lawyers’ billable hours needed to be overhauled.
He suggested that the system of charging in six-minute units be abandoned. And he said clients should be given the option of a firm quote “which would be a contractual agreement”.
In response to the furore created by these cases, the various attorneys general are discussing ways of reforming legal billing. Hmm. Could my bug bear be banished?
(Hat tip to Jim Belshaw at Managing the Professional Services Firm)
4 Comments
Time costing was brought in because it was more efficient, and allowed Rudd’s pet “performance review” KPI etc.
It may interest people to know that prior to time costing, I’m reliably informed, the solicitor would look at how big the file was and charge the fee. I’m serious. And clients didn’t complain! After that, if things got complicated and the client wanted some sort of justification, you’d send the file to a cost assessor who’d count the letters (split amongst short, standard and long), telephone calls etc.
Lawyers who saw this then cottoned on that long letters could be timed, in the same way as they recorded how long they spent on the phone or at Court, and time costing was born.
The evil in time recording comes down to:
1. pressure on lawyers leading to exaggerated hours recorded (eg read 1 letter, write response – time taken 2 minutes – charge 12 minutes – note that lawyer time also has to cover admin time -re-draft time, so this is only partly unfair).
2. no reward for efficiency – ie the slow lawyer is rewarded over the lawyer who got the issue resolved with a phone call, instead of 10 letters and a Court day.
3. cost control by hourly rate, and not by what the work was really worth.
There are more, but I have to go record some time!
Hear hear Pete!
I know I’m going to be unpopular here, but in fact solicitors have to read the thank you notes because if they don’t read them it might turn out that the note contained some instructions which they failed to act upon. If they have to read them, then they are probably entitled to charge for it. Whether they should is a question of their rapacious adherence to their entitlements vs the cultivation of goodwill.
In fact, the Keddies business model already has an aspect of fixed costs built into it: the fixed cost is zero on a contingency matter when the matter is lost. Conversely, if there were no time costing, I expect a large number of the clients would agree to a fixed cost which was just the same as the enormous time-based bills that are rendered, because they will still agree to almost anything if the alternative is that they will get nothing.
Time-cost billing has a moral hazard aspect, it’s true, and one which causes lots of angst, not only for the client but also in particular for the lawyer and especially the employed solicitor – “should this have taken me so long to do?” vs “Oh well, I can just bung some extra time onto that file to get my billables ahead for the month.”
Other systems also have hazards, such as clients who don’t tell their lawyers the full story at first (What about Mr Wang Jin riding the bicycle, for example?) or conveniently forget all the aspects of their case which will make it more difficult – not to mention the capacity of the other side (in contentious matters) to make things harder still.
The real problems are that (1) lawyers are expensive – if they weren’t, how could they maintain even a comfortable middle-class existence? and (2) unlike with, say, the barber or the greengrocer or even the car repairer, ordinary consumers don’t generally have enough repeat transactions to determine whether their lawyer is value for money compared to other lawyers or not.
I’m not going in to bat for Keddies but all the same the stories in the SMH appear to me to be selective in their use of detail, and misleading in their use of “payout” figures including costs which were never ever going to be the amount paid to the plaintiff. The person who cares about that figure is the insurer, and the Singapore story really comes out of that. Tell me that QBE is the worker’s friend!
Marcellous, you may well be right that the press has reported the Keddies case in a way as to make a good story out of it (ie, bad lawyers screw little people over). It will be interesting to see if the complaints are upheld or not.
It is very true that clients often fail to fully instruct their solicitors. I was reading a UK case the other day involving Mohammed Al Fayed (Bocardo SA v Star Energy UK Onshore Ltd & Anor [2008] EWHC 1756) in which Mr Al Fayed did not tell his current solicitors of an important interaction he had with the defendants (he had used different solicitors at that time). This only came out at trial – of course if you don’t tell your lawyers everything relevant they are not going to be able to do as good a job, and the last minute reshuffle to accommodate the new evidence at trial will cost more.
It’s also good to remember that the insurers are the real ones who fight these cases…