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20 June, 2008  
Accounting errors

The Keddies overcharging investigation in The Sydney Morning Herald shoots a large hole in the the legal profession’s campaign for more compo for personal injury clients. The revelations are ammunition for those who say that personal injury litigation is often more about the lawyers than the injured

The airing of allegations about large compo law shop Keddies indulging in gross overcharging is not only awfully upsetting for the Keddies’ people, it’s a bad look for the entire law caper.

The tireless campaign waged by the profession against the “roll back” of damages in civil liability, motor accident and workers compensation has had a nasty kick in the slats.

After all, what looks more unattractive? A doubling of insurers’ profits for CTP greenslips since the 1999 personal injury amendments, or legal and other costs of up to six times the amount received by the injured client?

The Law Council last year said that compulsory third party insurers had collected more than $10 billion in premiums since 1999, but have forked-up only $2.7 billion in damages.

The council also released a report as part of the “Fair Go for Injured People Campaign” showing that NSW WorkCover in less than three years time will have a surplus of over $3 billion. This is a nice turnaround for an outfit that only a few years ago had a $2 billion debt.

imageAgainst the starkness of those unsettling bits of economic data is The Sydney Morning Herald’s investigation in which some clients told the newspaper that Keddies didn’t reveal the amounts for which it had settled their claims, let alone what it was charging.

The Sydney Morning Herald also got hold of an email sent by Russell Keddie (pic), the principal of the firm, asking all his solicitors and clerks to add “12 units at partners’ rates for ‘Analysis of and Considering Strategy’ to all those matters that a Partner responds to you and adds an issue or two”.

He adds: “Thanks … we should be rewarded for the brainstorming.”

The pattern that the Herald discerned in its three months long investigation concerned clients with relatively poor English, often settlements done offshore, no bills presented and no settlement figures revealed.

Russell Keddie said in a letter to the paper that this was a “smear campaign” perpetrated by “disgruntled former employees who have set up in competition”.

He has hired the fearsome combo of Mark O’Brien and Bruce McClintock to fire off rebukes and warnings to the newspaper. Further legal developments are awaited, with interest.

However, the stories about Keddies may precipitate another round of soul searching about the billing habits of lawyers.

Already Allianz Insurance Australia has come out and said there is merit in capping lawyers fees at a maximum of 50 percent.

A few years ago NSW Chief Justice J.J. Spigelman tried to kick-off some fresh thinking, saying time based billing was “unsustainable”.

“As I and my predecessor, Chief Justice Gleeson, have often said over the years, it is difficult to justify a system in which inefficiency is rewarded with higher remuneration.”

His thoughts went off to some committee and nothing was heard further.

The Australian Law Reform Commission in its report on Managing Justice also urged that time based bills be done away with.

According to the ALRC this would “reduce overcharging and stop rewarding lawyers who are incompetent, inefficient or greedy”.

What has been interesting is the response to the Herald’s investigation into Keddies. Invariably many of the relevant voices ducked behind the billowing skirts of the regulator, the Legal Services Commission.

The cone of silence descended.

imageSections 722 and 723 of the Legal Profession Act make it unlawful to disclose relevant or personal information.

Three guesses who wrote that law, although a person “to whom the information relates” can always consent to the details being made public.

One of the barristers about whom an overcharging complaint to the LSC has been made, David Campbell (pic), said the legislation prevented him from responding in detail.

It is understood that Campbell has retained the law firm Verekers to protect his interests.

However, the president of the Bar Association, Anna Katzmann, while not being specific, was nonetheless forthright:

“The Association is unable to comment on the specific circumstances, which are the subject of a complaint to the Legal Services Commissioner. However, overcharging by any legal practitioner may amount to unsatisfactory professional conduct and in some cases professional misconduct. The association has a record of pursuing disciplinary proceedings against barristers who charge excessive fees. This is not a matter that the association takes lightly.”

The president of the NSW Law Society, Hugh Macken, released a statement that skillfully managed to avoid mentioning the word Keddies, even once. He did say that solicitors are required to advise clients in detail about how fees and costs are calculated.

imageMaybe it’s all a little awkward since a Keddies’ partner, Scott Roulstone (pic), is also junior vice president of the Law Society, chairman of the society’s injury compensation committee and a former member of its (mis)conduct committee.

Maurie Stack, the president of the Australian Lawyers Alliance, the plaintiff lawyers’ organisation, said in an unpublished letter to the Herald, “the alliance does not support the partners in Keddies, nor do we condemn them”.

What he did condemn was the sort of conduct that has been alleged against Keddies.

“Any personal injury lawyer who is a party to concealing from his or her client the amount of a settlement has no place in our profession.”

It cannot pass unnoticed that the big network of Stacks’ law shops is a competitor with the growing network of Keddies’ shops.

Last Friday (June 13) the ALA released a statement saying it “condemned any conduct by lawyers which is misleading or deceptive – but there was a system in place to deal with allegations like these”.

The professional bodies might like everyone to believe that these assertions by some of Keddies’ clients are an isolated glitch in an otherwise beautifully fair mechanism for compensating the injured.

Evidence here and abroad tells us that overcharging by lawyers is a widespread problem. Steve Mark, the Legal Services Commissioner, said at a conference of regulators in Darwin last week that there needs to be a thorough review of cost assessment, cost disclosure and overcharging by lawyers.

We can take it that he thinks that lawyers costs, the way they are calculated and charged, is a big problem for the profession.

Mark is also acutely aware that the courts have narrowed his capacity to bring gross overcharging cases against lawyers.

In fact, no one knows what “gross overcharging means”. Kate Hamond, who headed the now disbanded office of the Victorian Legal Ombudsman, “told the ABC’s Law Report”:

“Gross overcharging is a very difficult one, because we don’t have a simple formula, I dont think anyone in Australia does, for the difference between overcharging and gross overcharging, but certainly in our Act, gross overcharging is considered a disciplinary offence.”

Tulkinghorn also has been forced to write about this subject in a previous missive.

Surveys of private attorneys and corporate counsel in the United States have shown that lawyers intentionally pad their hours and bill two or more clients for the same work performed at the same time.

By no means is the practice confined to the US.

Ten years ago The Courier-Mail in Brisbane reported an investigation of solicitors’ bills that had been taxed. There were some extraordinary examples of overcharging, the worst being a bill of more than $9,000 than had been reduced to $245 – an overcharge rate of 98 percent.

What is so impressive is the speed with which lawyers can stump up money, along with confidentiality agreements, for clients complaining about being overcharged.

As Russell Keddie explained, the refunds his firm has paid were not an admission of overcharging.

“Paying them this money, it was more to say, ‘We’re sorry they were so unhappy’.”

So far no adverse findings against Keddies have been made by the Legal Services Commissioner.

Maybe, it was all a matter of regrettable administrative error and if sufficient refunds are doled out the whole thing will just go away and everyone can get back to charging “reasonable” fees.

Of course, this practice of refunding clients will only encourage the ungrateful sods to keep complaining, just to see how much they can claw back.

Unrelated footnote: Does the word “Keddie” have a special meaning? We could find no reference to it other than to a small town in California called Keddie. It is reported:

“On April 11, 1981 at the Keddie Resort, 3 grisly murders were committed in cabin #28. Glenna Sharp, 36, her 15 year old son John and 17 year old family friend Dana Wingate were bludgeoned and stabbed by assailants still unidentified. Sharp’s 13 year old daughter Tina, was missing from the scene when the bodies were discovered by 14 year old Sheila Sharp the following morning. Sheila had been spending the night with a friend. Glenna Sharp’s two youngest boys and another boy, still toddlers at the time had been spared and were found safe in another room of the cabin. Ultimately, Tina Sharp’s remains were discovered 3 years later. A bottle digger found her severed head 50 miles away near a water fall. In the years following the murders the Keddie Resort fell into disrepair and most buildings were condemned. Many around the area talked of the cabin being haunted. Cabin #28 was eventually razed, date unknown, either to detract ghost hunters or to make way for a new generation of Keddie Resort buildings. The case remains unsolved.”


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