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1 May, 2007  
Whadda you mean, da costs are too high?

In true Mafia style the NSW and Queensland lawyers got the old taxing officers bumped-off and the work given to members of the “family”. In Victoria, the traditional system survives. Why is this so?

imageIn lawyer lingo, “costs” are mainly profits, albeit gross profits. The terms “costs” and “fees” and “disbursements” are fairly interchangeable.

“Profits” and “costs” can be combined, as in the term “profit costs”. The Australian High Court in one case used that term 18 times. The crowning obfuscatory achievement is the term “taxation of costs”. It has little to do with “costs” and absolutely nothing to do with “tax”.

Until recent times in NSW and Queensland, a client who wanted to challenge legal fees took the bill to a “taxing officer”. In Law Society of New South Wales v Gallagher [1999] NSWADT 8, March 5, 1999 Graham Molloy, sitting as the Administrative Decisions Tribunal, said:

“Prior to 23 December 1983 Bills of Costs were taxed by Taxing Officers in the Supreme and District Courts. Those officers were public servants, often as high as Registrars and Deputy Prothonotaries, and they taxed Bills of Costs prepared under the then applicable and strictly enforced cost scales. Under that taxing system not only was each item carefully examined and dissected but often items were completely ‘taxed off’ or partially ‘taxed off’ on the basis that the item claimed was not ‘necessary or proper’ for the conduct of the matter. It was particularly notorious in litigation where lengthy and often acrimonious taxations took place before senior taxing officers.”

“Taxations of costs” were acrimonious because in NSW taxing officers were doing a very good job. The acrimony was imagecoming from the lawyers. As any Mafiosi will tell you, when confronted with this sort of “situation” you either come to an accommodation with the opposition, or you bump it off. NSW lawyers chose the latter path.

On October 27, 1993 in the NSW Legislative Council, a Labor shadow minister, the Hon. Ron Dyer said:

“Under the present law, if there is no costs agreement and the client is dissatisfied with the bill he receives from his solicitor, he can require that bill to be taxed by a court officer in accordance with the scales of costs that are available and in force. The bill in its present form abolishes those scales and also abolishes the taxing officers to which I have referred; it replaces them with what are termed cost assessors. Those officials must be barristers or solicitors of at least five years’ standing. They are to assess what they consider to be a fair and reasonable amount for the costs. It is apparent from the Attorney’s second reading speech that the proposed assessors will be part-time appointments and they will be barristers or solicitors who are still engaged in private practice. It is also self-evident that the assessment made by those assessors more often than not will be of a substantially higher amount than would have been allowed under the existing court scales by a taxing officer…”

Queensland lawyers gazed across the NSW border with stunned admiration. Queensland taxing officers were as “bad” (i.e. good) as NSW ones had been.

imageBy 1998 Queensland’s lawyers were getting desperate. On March 4, 1998 the Hon. Denver Beanland (seen here) presented the Civil Justice Reform Bill 1998 to the Legislative Assembly. He told the parliament that the proposed legislation would, “provide a new consumer protection regime with respect to the costs a solicitor can charge a client”.

In other words, a consumer protection racket. The explanatory memorandum to the Bill said:

“The present system, providing only limited protection for clients, dates from last century. It is centred on a costs auditing process, called taxation, conducted by an officer of the Supreme Court. It fails to adequately address the increased use of agreements between solicitors and their clients or the importance to consumers of fostering competition in the provision of legal services. The new scheme to be inserted by this Bill, will result in a more modern system, better suited to the needs of consumers of legal services at the end of the twentieth century.”

In response to the Bill, a Queensland solicitor, Paul Lynch, who incidentally has had some scrapes with the local law society, published the results of a study entitled “The Abolition of Taxation of Costs in Queensland” in the National Law Journal, which doesn’t seem to exist any more, although the article itself is preserved in the Pandora archive.

The study effectively said there was little wrong with the taxing system. It examined “solicitor and own client” bills filed in the Brisbane Registry of the Supreme Court between January 1, 1993 and December 31, 1997.

Of all bills filed 28.24 percent proceeded to a completed taxation hearing, and at those hearings the bills were reduced by an average 31.28 percent.

Under the rules, if a bill was reduced by one-sixth the solicitor was required to pay all the costs of the taxation. This occurred on most taxations, and the trend was increasing. Lynch concluded:

“Not only is the current system of taxation of costs effective in terms of its function as a regulatory system but the data demonstrates that it operates at no cost to the client in 90 percent of cases.”

But Beanland’s Bill was passed and private lawyers effectively took over the adjudication of disputes over fees.

In 1999 it was revealed that some of Queensland’s newly appointed assessors had previously been subject to overcharging allegations which they had privately settled out of public view. Two of them had actually been proved to be “overchargers”. One of them had in 1993 overcharged almost $17,000 according to a “taxation” done under the former system.

When Solicitors Complaints Tribunal chairman John O’Keeffe, who is responsible for appointing costs assessors, was told that two of them had previously been caught overcharging clients, he said:

“They didn’t disclose that to me.”

Victoria’s lawyers, however, are thriving under a regime of taxing officers and scales. Apparently there is no pressure from the profession to bump off taxing officers.

In March Crown Counsel produced a report on the role of Masters in the litigation system generally, which is combined with a report concerning “costs”. The report follows an issues paper.

The general idea seems to be to replace the four courts/tribunals dealing with costs (Supreme, County, Magistrates and VCAT) with a one-stop shop. With remarkable frankness the report says:

“The creation of a new costs office would not of itself reduce litigant costs … anecdotal responses indicated that the New South Wales model would not reduce litigation costs or create efficiencies. Practitioner respondents felt that the New South Wales model was cumbersome and lacked openness, while the courts felt that it had the potential to increase costs… New South Wales’ out-sourced model was not supported by either court or practitioner respondents to the issues paper.”

So why are taxing officers thriving in Victoria? Has the Victorian legal profession wangled a regime of tame taxing officers, or has it over-inflated the fee scales, or both?

Are Victorian ‘taxations’ acrimonious? If not, why not? What lessons did Victorian taxing officers draw from NSW and Queensland events? How do Victorian scales compare to those that used to exist in NSW and Queensland?

Why do Victorian lawyers like “scales” so much they have reintroduced them in conveyancing, but called them “Practitioner Remuneration Orders” (don’t ask me how they got that past National Competition Policy).

As I said earlier, when confronted with “situations” you either come to accommodations with the opposition, or you bump it off.

It looks like Victorian lawyers prefer the former, NSW and Queensland lawyers, the latter.