A common complaint we hear from frustrated strata managers is bill shock – what should an OC expect from its lawyers, and what can it do when the bills get out of hand?

3 recent findings against one strata firm

1. Over the past 18 months, we have acted for 3 OCs who queried the costs of their former lawyers, the same well-known strata specialist firm.

2. Those decisions resulted in:
  1. A 53% reduction, from $84,600 to $39,500.  We had to sue them to recover it (and won costs and $4,000 of interest).
  2. A 25% reduction, from $28,000 to $21,000.
  3. Reducing fees from $226,000 to $128,000 (43% reduction), plus ordering the firm to pay the assessment costs ($10,000) and our costs of the assessment ($6,600).
Generally

3. At the start of a matter, a law firm must tell the owners corporation (OC) how its fees will be calculated and give a genuine estimate (and not a range) of the total legal costs. If anything changes significantly, the firm must tell you as soon as practicable and give you a revised estimate.

4. Hourly billing rewards time spent. Insurance commissions are being phased out because they (in theory) give a financial incentive to a strata manager to accept a higher premium. Similarly, hourly billing gives lawyers a financial incentive to spend more time on a file than is needed.

5. Common examples of spending more time than needed include:
  • sending an email, following it up with a phone call, and charging for both.
  • charging for advice on something the OC didn’t ask for.
  • extensive research on a topic that may not be needed at that stage.
6. OCs also have an extra layer of protection. Under s 103 of the Strata Schemes Management Act 2015 (NSW), legal services generally need general meeting approval once the costs will exceed $3,000 (or $15,000 if urgent work is needed). A firm acting for an OC should be watching that threshold with you and we have seen costs assessors reduce lawyers’ costs where they failed to do this.
The most recent decision

7. In that most recent costs assessment (in 2(c) above), most of the $226,313.30 had been billed in just over a year. The work covered three related NCAT proceedings, and the assessor found the firm’s 4 written estimates added up to about $21,000.

8. The standout findings by the assessor included:
  • Two lawyers at hearings. It was “excessive to charge for two or more fee earners to attend an NCAT Conciliation conference or at the hearing”.
  • Re-reading documents. Re-reading the client’s documents “should not be necessary and cannot be justified”, because the lawyer running the matter should already be familiar with them.
  • Training. Senior lawyers supervising juniors is “the cost of training and in the nature of an administrative overhead”.
  • Travel. “Travel time is not professional work and cannot be claimed at professional hourly rates”, and a more appropriate rate is 50% of the rate.
  • Admin work. Printing, preparing folders, diarising and leaving messages were disallowed as part of the overheads.
  • Other points. A claim for a 7-hour hearing day included the lunch break. Junior lawyers’ rates were cut from $460 to $300 an hour.
9. Every invoice carried the same matter description, “Defence of interim proceedings”, even though they covered three separate proceedings, two of which were substantive. This made it difficult to match the work against each estimate.
What should you look for?

10. Strata managers and other clients should not be shy about going through invoices and asking questions. Remember, the firm is meant to be acting in your best interests, not its own.

11. Whilst it can create a little more work, take some time to go through the invoices, or ask the strata committee or treasurer to do it. Tips of what to look for:
  • Double-ups. Two lawyers charging for the same thing, or a senior lawyer charging to “review” or “settle” a junior’s work. Yes, training is needed, but not at the client’s cost.
  • Two lawyers at one meeting/hearing. Did you ask for this, and is it adding value or necessary?
  • Admin at lawyers’ rates. Printing, folders, diarising dates, voicemails and arranging meetings.
  • Vague or bundled entries. “Email correspondence with client” tells you nothing. Neither does a charge that lumps several tasks together. You should be able to tell what was done and why, so you can determine if it is fair.
  • Did you ask for the work?  Some lawyers take it upon themselves to carry out work you may not have asked for.
  • Bills outgrowing the estimate. If the bills have passed the estimate and you haven’t received a revised one, ask why.
What are your rights?

12. If you only received a lump sum bill, you can ask for an itemised one.

13. If you have an itemised bill and are still unhappy, you can ask for a reduction and raise the issues you found.

14. If that cannot be resolved, you can apply for a costs assessment, generally within 12 months of the final bill (but this can be extended). If the firm failed to give proper estimates, it may have to pay the costs of the assessment as well.
Other options – fixed fee work

15. Due to concerns over bill shock and large bills, we have started doing fixed fee work, even on building defect claims.

16. With fixed fee work, the OC knows the cost upfront and can budget for it. If the matter takes longer than expected, that is our problem, not yours.
The takeaway is simple

An estimate is a promise to keep you informed. If your legal bills have outgrown it and nobody told you, ask questions, and ask them early.

Victor Mok, Senior Paralegal
James Moir, Principal Lawyer

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