Lawyers must charge fees that are both reasonable and fair, considering the needs of both the client and the lawyer. KC v TG [2022] is a recent example of where the Legal Complaints Review Officer (the LCRO) found a lawyer had engaged in unsatisfactory conduct for his billing practices.

Mr T engaged Mr K to help him with employment issues that had arisen in his job. The agreement between Mr T and Mr K said that fees would be charged “based on time and attendance, office expenses and disbursements”. That meant Mr T would pay between $360 - $450 for every hour of work that Mr K completed.

Over 11 working days, Mr K completed 48 hours of work. This included reviewing two letters, research, drafting a witness statement, and attending a disciplinary meeting. Mr T asked for an update on how much this was all costing. Mr K issued an invoice to Mr K for $19,027.90. Mr K terminated the retainer because of the legal fees and lodged a complaint. The Standards Committee’s decision was appealed to the LCRO.

The LCRO decided to focus on the totality of the fees’ information given (rather than Mr K’s strategic legal approach) and consider whether the information met the requirements of the Lawyers and Conveyancers Act (Conduct and Client Care) Rules 2008. The LCRO said that:

• Providing an hourly rate means nothing to most clients. Most lawyers include a provision for monthly invoices or invoicing at the conclusion of significant event.
• There is no obligation to give an estimate unless requested but there is an obligation to keep client fully informed about their matter. A lawyer may be able to give an upper estimate of fees as the claim develops.
• Where a claim is urgent and important, a lawyer may sometimes need to give daily fee reports. This helps to avoid “bill shock” when the lawyer provides an invoice for a substantial amount without warning.
• A lawyer should consult their client about fees where there is an unexpected development that may change the trajectory of the claim.

Ultimately, the LCRO decided Mr K breached his obligations by failing to keep Mr T up to date with his fees. This resulted in unbilled time building up without Mr T’s knowledge, which was fundamentally unfair.

Fair and reasonable fees for the work was determined to be $13,500 plus GST and disbursements. Mr K was ordered to refund a portion of the fees, pay a fine of $2,000, and pay costs of $1,200 to the New Zealand Law Society.

The take-home message is that a lawyer’s obligation to charge fair and reasonable fees goes beyond just looking at the total figure. Unless something is really wrong, the Law Society will avoid criticising a lawyers’ strategic approach. However, lawyers must communicate effectively with their client about costs throughout the retainer. They have a duty to protect clients from ‘bill shock’, especially when many clients will have little understanding of what level of fees to expect.