Sharon, Drew --- "Costs column: Costs and disciplinary action" [2018] PrecedentAULA 50; (2018) 147 Precedent 48

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COSTS AND DISCIPLINARY ACTION

By Sharon Drew

Disciplinary action against legal professionals stems from a finding of unsatisfactory professional conduct or professional misconduct. The regulatory legislation applicable in each state or territory throughout Australia lists various forms of conduct capable of giving rise to disciplinary action, including charging excessive legal costs,^[1] although a breach of any part of the costs regulatory scheme could amount to unsatisfactory professional conduct or professional misconduct. As noted by Professor Dal Pont, the connection between legal costs and professional responsibility and ethics seems clear.^[2]

At the core of any fiduciary relationship is a prohibition on the fiduciary making an unauthorised profit from the relationship. In the lawyer/client realm, charging for legal services is potentially a fiduciary breach unless the charges are authorised by the client, hence the importance of costs disclosure and informed consent which are now fundamental to regulatory legislation.^[3]

Regulation of disclosure, costs agreements and the system of taxation or assessment of costs are directed to the individual client relationship. In contrast, disciplinary proceedings are directed to the relationship between the profession and the public, with its principal objective being protection of the public.^[4] Sanctions are accordingly punitive, aimed at both punishing the offending lawyer and acting as a general deterrent for the legal profession.

The range of conduct which may result in a finding of unsatisfactory professional conduct include: failure or delay in providing disclosure, failure to provide itemised bills and overcharging. The penalties imposed range from caution and reprimand, compensation payments and fines, through to striking off for serious professional misconduct offences.

Not every instance of overcharging will constitute professional misconduct. Professor Dal Pont notes that ‘Only overcharging from which the public more broadly needs protection, that tarnishes the profession’s reputation and may prove necessary for the purposes of deterrence is a candidate for disciplinary sanction.’^[5] Therefore, not every case where costs are reduced following assessment or taxation will result in an additional disciplinary sanction.

Where the lawyer has breached multiple obligations, such as disclosure in addition to overcharging, disciplinary sanctions frequently follow. A costs agreement of itself will not necessarily justify excessive charges. A proper consideration of all factors will likely include whether the client has provided fully informed consent. In this regard, the respective positions of the lawyer and client are relevant – clients do not ordinarily know what work is required and what charges are fair and reasonable, and place trust in the lawyer. Clients are entitled to be protected against the abuse of this trust,^[6] by the lawyer charging for work which is not required, or charges which are excessive.

In terms of overcharging, the amount charged which is found to be excessive or not fair and reasonable is relevant to some degree on whether the conduct is found to be unsatisfactory professional conduct or professional misconduct, and the sanction imposed. However, a finding of unsatisfactory professional conduct has been made in situations where the amount overcharged is as little as $13,800.^[7]

In a recent Queensland case^[8] a solicitor in a supervising partner role at one of Australia’s market-leading firms admitted to overcharging various clients totalling more than $515,000 by falsifying time records. In considering whether the conduct warranted striking off, the Queensland Civil and Administrative Tribunal weighed the personal interests of the solicitor and the public interest and determined that striking off was not appropriate. The Tribunal concluded:

‘The best safeguard against the possibility of misplaced public indignation at the thought of a dishonest lawyer being permitted to return to an honourable profession that values honesty and trust as highly as the legal profession does is for these reasons to be fully read and understood. We are optimistic that every reasonable person who takes the time and makes the effort to examine all the facts and weighs the rival considerations in this vexed case will accept if not fully agree with it as a fair and reasonable outcome for all concerned.’^[9]

The prevailing views may be summarised in the following extract from Council of the Queensland Law Society Inc v Roche:^[10]

‘practitioners who continue to breach their fiduciary duty by placing their own and their firm’s interests before those of clients, importuning them to enter into costs agreements charging exorbitant fees...can expect heavier deterrent penalties for their professional misconduct. Substantial penalties will be justified to protect primarily the public but also the reputations of the vast majority of decent practitioners to whom such conduct is abhorrent.’

Whether or not a finding of unsatisfactory professional conduct or professional misconduct will follow in circumstances of ‘overcharging’ is necessarily a question of degree. As lawyers, we should bear in mind our fiduciary duties to clients and not seek to profit at their expense. In the words of Professor Dal Pont, the ‘temptation to “milk” clients for as much as possible’^[11] should be resisted if we are to maintain our professional standing.

Sharon Drew is Principal of Blue Ribbon Legal – specialising in legal costs disputes. PHONE [phone] EMAIL [e-mail] WEB www.blueribbonlegal.com.au.

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^[1] The phrase ‘charging excessive legal costs’ is found in: Legal Profession Act 2006 (ACT), Legal Profession Act 2006 (NT), Legal Profession Act 2007 (Qld), Legal Practitioners Act 1981 (SA), Legal Profession Act 2007 (Tas) and Legal Profession Act 2008 (WA). In the Legal Profession Uniform Law, enacted in Victoria and NSW, the phrase ‘charging more than a fair and reasonable amount for legal costs’ is used.

^[2] G Dal Pont, ‘Contextualising Lawyer Overcharging’, Monash University Law Review, Vol. 42, No. 2, 2016, 283 at 285.

^[3] Ibid, 291.

^[4] Ibid, 294.

^[5] Ibid, 296.

^[6] Veghelyi v Law Society of New South Wales [1995] NSWCA 483 (Mahoney JA).

^[7] Victorian Legal Services Commissioner, Determination 1 of 31 October 2016. Note: of relevance is the fact that the amount charged was reduced from $17,600 to $3,784, a reduction of almost 80 per cent.

^[8] Legal Services Commissioner v McDonald [2018] QCAT 82.

^[9] Ibid, [112].

^[10] [2003] QCA 469; [2004] 2 Qd R 574, [57].

^[11] See above note 2, 307.