Is there any other industry or sector that agonises as much as the legal sector over how it charges for its services?
Here are some of the methods of charging that are considered to be either bad, old fashioned or immoral:
Time recording is probably the winner in all three categories. Oddly, it seems to be the method most accepted by clients.
Subscription services are criticised because they over-promise and under-deliver.
Fixed fees are considered extortionate.
No win no fee is considered misleading.
Contingency fees mark the end of the legal world as we know it – in Australia.
Then there is the potent mix of litigation funding combined with no win no fee legal costs. This is particularly despised by the big end of town who is usually at the receiving end of these cases.
It is as if every known method of charging for services is bad. There is still one that hasn’t lost its halo. It is known as value pricing. The theory is grand – charge for the value that you are providing – but its lack of adoption by clients is puzzling.
There has been a breach in the wall holding back contingency fees. The Victoria Government has permitted contingency fees in class actions. This follows the Victorian Law Reform Commission recommending its use.
Of all the bad charging methods, contingency fees has long been considered the baddest, particularly by those who can time charge with ease.
The Law Council’s perspective:
At a recent board meeting of the Law Council, directors resolved to oppose contingency fees as a matter of principle.
At the meeting a fundamental concern was expressed that contingency fees could not be introduced without adversely affecting litigants’ interests and lawyers’ ethical duties.
“I am a passionate advocate of promoting access to justice, but I do not accept that contingency fees will promote that objective,” Law Council President Pauline Wright said.
“Should any government in Australia propose any contingency fee arrangements, the Law Council will have to carefully consider that proposal as against all the legal profession’s fundamental obligations.”
The motion followed consideration by the Victorian Government to allow plaintiff lawyers to claim a percentage of the amount recovered in a successful group claim as their costs payable in the proceeding. It was considered that the model proposed could create a conflict of interest between the solicitor and the client, requiring solicitors to run the risk of adverse costs orders and security for costs.
“In most jurisdictions in Australia a ‘no win – no fee’ arrangement is available that enables civil claims matters to be taken on for clients without deep pockets and matters that merit litigation in the public interest,” Ms Wright said.
“Public interest cases would not benefit from the introduction of percentage-based fee agreements, and neither would low income matters.”
“Percentage-based fee agreements would only benefit large law firms that are already billing via conditional fee arrangements – generating a higher premium with no commensurate increase in risk,” Ms Wright said.