From the Conduct Commissioner: Overcharging complaints – what has changed? – By Greg May

Overcharging complaints: what has changed?

GREG MAY, LEGAL PROFESSION CONDUCT COMMISSIONER

In my article in the August 2019 Bulletin, I briefly summarised the changes that were being made to the Legal Practitioners Act (Act) by the Legal Practitioners (Miscellaneous) Amendment Act 2019 (SA) (which was then still a Bill). Those changes came into operation on 1 December, 2019. There have been further changes to the Act since then, which were made by the Legal Practitioners (Foreign Lawyers and Other Matters) Amendment Act 2019 (SA), with the relevant changes for the purposes of this article coming into operation on 21 May, 2020.

I want to focus in this article on the changes made by both Amendment Acts to the way in which I can deal with overcharging complaints. For this article, I will ignore the somewhat problematic transitional provisions that apply to those complaints that were made between 1 December, 2019 and 21 May, 2020.

Overcharging complaints are dealt with in section 77N of the Act. Previously, I could only make a binding determination as to whether there had been any overcharging if the amount in dispute was no more than $10,000. That amount has now been increased to $50,000.

Before I can make a binding determination, I have to obtain a costs assessment of the practitioner’s legal costs – which I normally get from an external expert, and which obviously comes at a cost. Accordingly, I have not normally obtained such an assessment unless I could make a binding determination – there was no point incurring that expense if all I could do was make a non-binding recommendation.

There will now be many more overcharging complaints in relation to which I can make a binding determination.

In addition, I can now pass on the cost of obtaining the necessary costs assessment to either the complainant or the overcharging practitioner. Under new section 77N(4a), I can require the complainant to pay the reasonable costs of the costs assessment upfront, and then refund that amount to the complainant “if the complaint is upheld”. Then, under new section 77N(10)(c), it the complaint of overcharging results in a determination or finding that there has been overcharging, then the cost of any costs assessment undertaken “are recoverable from the legal practitioner . . . as a debt due to the Commissioner”.

So, how will this all work in practice?

Any costs dispute between a firm and its client can of course be resolved at any time, whether before a complaint is made or after, by negotiations between the firm and the complainant. And some costs disputes will head to the Magistrates Court after the firm issues recovery proceedings, or to the Supreme Court for adjudication.

If an overcharging complaint is made to me then, like any complaint, I can close it under section 77C of the Act, if it is appropriate to do so.

If I decide to investigate an overcharging complaint, then as with any complaint it will be published to the practitioner and investigated. At the end of the investigation, I will then report on my findings –which may be that I have no definitive view, that there is no (evidence of) overcharging, or that there is (evidence of) overcharging.

If I report that there is (evidence of) overcharging, I can make a non-binding recommendation for the firm to reduce its fees, or to make a refund.

Either during the investigation or after a recommendation, my office is able to assist the parties to conciliate an agreed resolution to their dispute.

If the recommendation is accepted by both parties, or if a conciliated outcome is achieved, then that will usually be the end of the matter.

Assuming there is no agreement though then, if the amount in dispute is $50,000 or less, I will consider whether or not I will proceed with the process of making a binding determination under section 77N(7).

As before, I must first obtain a costs assessment, for which I will need the practitioner’s file. Now, before I obtain a costs assessment, I will (usually) ask the complainant to pay an amount upfront on account of the anticipated cost of the costs assessment.

Once I have obtained the costs assessment, then both the practitioner and the complainant can make submissions on it.

I will then make a binding determination.

I will also need to decide whether to refund the amount the complainant has paid for the costs assessment. If I decide to do so, then I will most likely also decide that the practitioner should pay those costs instead.

In deciding who will bear the cost of the costs assessment, I will take into account the amount by which the amount I have determined should be paid is: • less than the firm’s costs; • different from the recommended amount; • different from the amount of any offer made during negotiations or conciliation.

I will then apply the “15% rule” – which approach is essentially based on clause 49 of Schedule 3 of the Act. That is, the cost of the costs assessment will be borne by the practitioner if the complainant improves his or her position by 15% or more, or by the complainant if there is less than a 15% improvement.

The risk of having to pay for the costs assessment is one that I would expect both the practitioner and the complainant to take into account in negotiations. B