In-house lawyers and the national corporate lawyers’ body have dismissed claims that the billable hour is the “choice of the client” by the president of the NSW Law Society and HWL Ebsworth partner, Stuart Westgarth.

Speaking at a Law Society dinner Westgarth said: “In markets where sophisticated clients operate, the choice of the client is often that of hourly billing.” Mark Buckland, general manager legal & compliance, Dymocks Group of Companies, said he did not agree with this statement.  “I do not think it could be said that general counsels’ ‘choose’ the billable hour,” said Buckland.  “I think the reality is that as the billable hour has acceptance as the measure of value for legal services it is, as a default, accepted by general counsels. Given a choice, my view is that almost all general counsel would prefer alternative billing methods.”

Westgarth defended the use of the billable hour by law firms, claiming that although there are regular criticisms of the practice of hourly billing, including that it rewards the slow and inefficient, these comments often ignore other relevant factors. He continued: “They ignore the fact that the great majority of solicitors understand the responsibility to charge the amount which is fair and reasonable. They ignore the fact that most solicitors want repeat business either from the same client or new referred clients.”

Buckland agreed that while lawyers are almost universally responsible and ethical with how they bill clients, he does not think time recording is “fair and reasonable” to clients. He added: “Time recording reflects time spent on a matter, not value received by the client. The system does not reward legal practitioners for completing a task more quickly than other lawyers and nor does it reflect value received by the client. Moving to more concrete billing methods will improve the lawyer-client relationship by removing billing from the centre of the interaction and allowing the parties to focus on the real value that a lawyer adds.”

According to Australian Corporate Lawyers Association CEO, Trish Hyde, it is a stretch to say that the billable hour is used by choice.  “ACLA/CLANZ’s 2010 Legal Department Benchmarking Report shows that only 4% of in-house counsel responded that hourly billing was entirely appropriate and the best approach,” she said. In order to really address this issue, Hyde said firms had to recognise that there is a need, and a market, for well-planned and developed alternatives to billable hours. “Some have already made this step and will no doubt ultimately benefit ahead of those that rely on billable hours,” she said. However, Hyde also acknowledges the importance of in-house counsel ensuring they scope work well, to enable law firms to embrace the alternatives to hourly billing. “Our research shows that law firms are very willing to discuss alternative fee arrangements. So it appears it is not a lack of discussion, but finding the alternatives that will work,” she added.

Ron Pol, director of Team Factors which conducted the research for the Legal Department Benchmarking Report, says on one point Westgarth is right: “Lawyers’ fees should be fair and reasonable.” However, whether the billable hour remains the best option for achieving these goals, is less clear, he added. 

While Pol acknowledges that some general counsel choose the billable hour, he says it would be too simplistic to use this truism as justification for not looking beyond the billable hour. “If firms are happy with hourly billing, and clients want them too, that’s perfectly fine,” he said.
Pol has been involved with shaping successful alternative fee arrangements, but is the first to admit that it can be very difficult to get the balance right. “Crafting something that’s fair for the client and the firm…is certainly possible, yet sometimes involves considerable work. The hourly rate has the benefit of being simple, so is often used as a crutch for those unwilling or unable actively to explore meaningful alternatives,” he said.

Related stories:
Spigelman calls for more competitive legal services from Australian firms 1 February 2011

Chief Justice calls for debate on billable hour 29 October 2010