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Cite as: (2006) 80(9) LIJ, p. 76

Consumers are taking a greater interest in why and how lawyers charger for their services.

Many openly seem to lament the so-called “commercialisation” of legal practice and see it as a threat to the profession’s ethical commitment and status.

To this end, they hark back to the days, not too distant in the past, when legal practice was conducted in a fashion where, in the words of Harvard Law School Dean Roscoe Pound, “Gaining a livelihood [was] incidental” and “Pursuit of the learned art in the spirit of a public service [was] the primary purpose”.[1]

Let us assume, for the sake of argument, that the modern practice of law is indeed commercialised to a greater extent than in the past.

The modern profession, unlike its antecedent, now operates in an environment where regulators have empowered the consumer and the “market” is worshipped as a means of securing the greatest good to the greatest number.

However, from within the legal profession there are many who have questioned the direct application of competition policy to the services provided by the legal profession.[2]

What underscores it is the belief not only that consumers can compare one lawyer to another almost entirely on price (fee), but also that legal services are no different in nature to any other services.

If these assumptions are accurate, the prospect is that the scope for professional and ethical judgment in the practice of law will be reduced, at least in the mind of the consumer (and possibly in the mind of the lawyer), to an equivalent level to the supplier of, say, telephone or electrical services.

Interestingly enough, intertwined in Dean Pound’s earlier description of the legal profession, was his observation that “the member of a profession does not regard himself as in competition with his professional brethren”, and “is not bartering his services as is the artisan nor exchanging the products of his skill and learning as the farmer sells wheat or corn”.[3] 

Though such an observation is perhaps strangely quaint in today’s legal environment, one cannot discount a link between the application of competition policy to the legal profession and a perceived increase in the mercantile approach to the practice of law.

If indeed the focus of competition is, more often than not, ultimately on price, it proves unsurprising that lawyers’ fees have come under the microscope. The concern of regulators, presumably, is that without free competition the consumers of legal services will pay too much. But essential to free competition is an informed marketplace. And this is one of the motivating forces behind the broadening disclosure requirements statutorily imposed on lawyers.[4] 

Also, the past 25 years or so have seen a blossoming of case law in which costs agreements are set aside on the grounds of lack of fairness or reasonableness.[5]

An incomplete disclosure of prospective costs exposure has proven a ground to set aside a costs agreement for lack of fairness. For example, in Passey v Chanaka Bandarage,[6] the ACT Supreme Court held that the lawyer should have explained that the flat rate hourly charge would result in a significant overcharge relative to the scale, that the costs recoverable would be significantly less than those the client would be charged, and that other competent lawyers in the relevant field of practice might well charge significantly less.

If the latter disclosure is central to avoiding an inference of unfairness, it requires a lawyer to advertise the (lower) fees of his or her competitors. No other service provider in a competitive market is subject to an equivalent obligation, an obligation that places lawyers in an invidious position, and is the very converse of a mercantile approach.

Of course, many of the cases where costs agreements have been set aside have involved lawyers in personal injury or family law work in which they have extracted potentially exorbitant fee entitlements from clients who, rather than being experienced or knowledgeable, were instead particularly vulnerable and reliant on the lawyer.

In this context, one Australian court has gone so far as to remark that a failure to fully and frankly advise as to the relative level of the fees proposed to be charged or to secure the client is independently advised is, where those fees are exorbitant, “no better than theft”.[7] 

It is arguably cases of this kind that have given what is known as time charging (or hourly billing) a bad name.

In this regard, time charging has been put forth by many as an exemplar of the lamented modern commercialisation of legal practice mentioned at the outset of this column. And yet one must query whether the alleged “mercantile attitude” to legal practice is fostered more so by time charging than other forms of fee charging, bearing in mind that whatever form of charging is adopted, it must operate in the modern environment of competition policy. The latter is a point I will develop in a later LIJ column.

GINO DAL PONT is Professor, Faculty of Law, University of Tasmania.

[1] R Pound, The Lawyer from Antiquity to Modern Times, West Publishing Co, 1953, p5.

[2] See, for example, JJ Spigelman, “Are lawyers lemons? Competition principles and professional regulation” (2003) 77 ALJ 44.

[3] See note 1 above, p10.

[4] See Legal Profession Act 2004 (Vic) Pt 3.4 Div 3.

[5] The jurisdiction, although originally recognised at general law, has a statutory equivalent in the Legal Profession Act 2004 (Vic) s3.4.32.

[6] [2002] ACTSC 105 at [39] per Higgins J.

[7] Re Law Society of the Australian Capital Territory and Roche (2002) 171 FLR 138 at 149 (FC)(ACT)).


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