By Michael Legg -
Snapshot
- Under the Legal Profession Uniform Law (NSW) solicitors are entitled to charge fees which are fair and reasonable.
- Legal fees may be charged in a number of ways, including through an hourly rate, fixed fee, retainer or conditional fee.
- The selection of a fee arrangement requires consideration of its advantages and disadvantages for both client and lawyer.
The first article in this series documented the challenge to time-based billing from Alternative Fee Arrangements (‘AFA’) (Chen & Legg, ‘The Kill Bill Movement and Alternative Fee Arrangements’ 72 Law Society of NSW Journal, Nov 2020, 70-72). This article continues that discussion by defining a range of billing methods and explaining the advantages and disadvantages of each.
Time-based billing
Time-based billing involves charging the client by reference to the time taken to complete the work required, multiplied by each lawyer’s hourly rate. It is effectively costs-plus pricing where the price is calculated by way of the cost of providing the services (labour and overheads) plus a mark-up or profit. Time-based billing has been criticised because it can create a perverse incentive to prolong and complicate matters to generate greater billable hours. The total cost of a legal service may also be unclear or unknown, which can create an uncertain liability for a client. Equally, it must be recalled that the client has numerous protections, including costs agreements, mandatory disclosures such as costs estimates and updates, requirements that costs be fair, reasonable and proportionate as well as an ability for the client to obtain an independent review of the lawyer’s bill. See the Legal Profession Uniform Law 2015 (NSW) (‘LPUL’), Part 4.3.
It is important to also recognise the advantages: a client can see the tasks undertaken, how much time was spent, who did the work and the hourly rate used. This provides for transparency in assessing the work undertaken by the lawyer. It can also be an effective way to deal with a matter that has numerous variables and an unclear progression.
