This was a 1993 decision of Barker J. in the High Court in Napier.
It involved the administration of a deceased estate. Two bills were rendered - one for $12,475 and the other for $5,520, in both cases plus GST. The Hawke's Bay district Law Society appointed 2 costs revisors.
After the cost revision hearing, the cost revisors held that a charge of some $18,000 was unjustifiable and the total accounts were reduced to $12,035 plus GST - a reduction of $6,000.
The law firm then appealed to the Registrar. The Registrar noted that the bills were costed out, mainly on a time basis. The Registrar took the view that the charge out rate for the supervising partner whilst, at the "top end of the scale", was acceptable; but the charge out rates for the firm's staff who undertook much of the work on the file was not acceptable.
In the result, the Registrar upheld the decision of the cost revisors stating that they had acted correctly in taking into account bills previously rendered and that the reasons we are reasonably explicit and clear. He found that they had not acted contrary to the evidence, nor had they failed to apply the Principles of Charging set out in the Costing and Conveyancing manual. The Registrar did not state his view as to a proper charge out rate or to a proper number of hours.
The basis of the law firm's appeal of the Registrar's decision to the High Court was:
(a) failure of the cost revisors and the Registrar to give reasons, thereby denying the appellant's natural justice; and
(b) a number of comments were allegedly made by the Registrar at an early stage of the hearing which, in the view of the law firm, were evidence of prejudice and/or pre-determination
Barker J. observed, "… I should have thought that what the cost revisors and the Registrar was saying fairly clearly in their judgments was that, in assessing bills of costs, solicitors should "stand back" and see whether reliance on time records multiplied by an arbitrary rate has produced a reasonable fee in all the circumstances.
Whilst the reality of life in the modern law office requires the keeping of time records, these records must only be used as a guide to ascertaining a proper fee; otherwise, a premium is placed on inefficiency; experience and skill may not receive a proper reward"
Despite the fact that the NZLS scale of professional charges was abolished some 10 years prior to this decision, Barker J. was still moved to comment, "… these bills of cost demonstrate the downside of the abolition of the law society scale for administration of estates. The scale rewarded the efficient and penalised the target. It also shows a "swings and roundabouts" approach that would probably be unattractive to cost accountants or legal office managers. The replacement of the scale - the guidelines of the law society referred to by the cost revisors, the Registrar and at the hearing before me - are fairly imprecise on the setting of hourly rates and the weighting for skill and complexity. Individual judgment on a proper level of fees is still required".
This decision is perhaps best known and cited for the principle that whether one is talking about the old Principles of Charging or the new Reasonable Fee Factors, it is important not to attempt to determine an appropriate fee without considering all relevant factors (not just time expended and hourly rates) and on a case-by-case basis, attaching a proper weighting to each of those factors.
The result of such an analysis may well result in a ' proper' fee being something less than that indicated by time records alone and conversely, a ' proper' fee may be substantially higher than that indicated by time records alone.
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