War on the tyranny of the time sheet
By Chris Merritt
The Victorian government is planning a renewed push to encourage law firms to wind back the use of billable hours.
The first firms to feel the impact of the crackdown will be those working for the state government.
Attorney-General Rob Hulls is also planning legislative changes that will ensure the campaign against billable hours has a broader impact.
Both moves are aimed at giving government and private consumers of legal services greater certainty about their legal bills.
“The use of time costing has had its time in the sun,” Mr Hulls said.
“Its opponents are getting louder and I think that is a good thing.
“They are determined to see the end of the billable hour as the only billing option.
“I also think that’s a good thing.”
Mr Hulls said the state government was already using rules governing the outsourcing of legal services to require greater use of fixed fees.
But law firms on the government’s panel were not making enough use of alternatives to time charging, he said.
About 7 per cent of the government’s legal work was covered by fixed-price agreements and about 8 per cent was covered by capped fees.
“I am absolutely determined to see this rate increase significantly over the next year,” he said.
He also indicated that firms working for private clients were about to be affected by legal changes aimed at discouraging time charging.
The Civil Procedure Act already imposed an obligation on lawyers to ensure that costs incurred in a civil proceeding were reasonable and proportionate.
“But the next stage of the civil procedure reforms will address the Law Reform Commission’s recommendations about the need for more determinate, predictable or fixed costs.
“I am keen to go in pretty hard in relation to this issue,” he said.
Work had already begun on the second stage of the civil procedure reforms, but a bill was not expected to be ready for parliament this year. “We are going to have discussions with stakeholders but I want to do everything I can to change the current, archaic system and I am going to look at all options,” Mr Hulls said.
Victoria’s crackdown on billable hours comes soon after one of the state’s most senior judges, Clyde Croft of the Supreme Court, warned that the use of billable hours was limiting the ability of the courts to ensure litigation was conducted efficiently.
It is in line with the Law Reform Commission’s 2008 Civil Justice Review, which said “time recording and economic and promotional incentives based on the volume of time recorded” served in some instances as “an incentive to overcharging and fraud”.
Mr Hulls said recent reports had suggested that part of the problem with billable hours was that “corporate Australia has the potential — at least — to be fleeced”. He said: “Young lawyers are being driven into the ground by the tyranny of the time sheet.
“Cost consultants are detecting a lot of padding and judges are saying that the billable hour
drives up activity and thwarts the courts’ efforts to expedite litigation.
“My view is that change is well and truly in the wind, with clients demanding alternatives to time costing and putting pressure on firms to come up with alternative options.” The plan to increase the amount of government work covered by alternative billing schemes follows moves aimed at giving government departments and agencies greater certainty about their legal bills.
“We are using the panel arrangements to chip away at what I would describe as another musty hallmark of the legal profession, and that is the billable hour,” Mr Hulls said.
This included the use of binding estimates, fixed fees and capped hourly rates.
Those responsible for administering the government’s legal services panel had encouraged panel firms to consider alternative billing arrangements, and presentations had been made on these systems.
“Under the current arrangements, panel firms are required to tender a capped hourly fee rate and government clients receive an estimate of costs for all work worth more than $2000, and are only obliged to pay the estimated amount,” he said.
“This has many advantages for government – it means costs can be better managed and it places more competitive pressure on panel firms to deliver quality legal services that are also cost-effective, rather than being at the mercy of the billable hour.”
Article from The Australian, September 3, 2010.