The slippery slope of over-charging

In another world it might be fraud to charge for something you know is not owing ... For lawyers overcharging morphs into acceptable professional conduct ... For non-lawyers "overcharging" results in jail time ... Tulkinghorn explains 

Industrial scale overcharging not seen as theft

JUSTICE Bruce McPherson of the Queensland Court of Appeal said in 2006 (referring to lawyers' bills):

"It is plainly dishonest to charge for something which you know is not owing. If the person to whom the charge is directed pays the amount charged or claimed, it would ordinarily constitute the offence of obtaining by false pretences, which under s 408C(1)(b) of the Criminal Code amounts to fraud. No one can say that fraud is not dishonest. And if the charge or claim is made but does not succeed in producing payment, it constitutes an attempt to obtain, which is also a criminal offence and also dishonest."  

In 2007 John Briton, Legal Services Commissioner (Queensland), gave a speech that referred to a survey conducted in conjunction with NSW Young Lawyers.

With reference to part of the survey dealing with fees, the LSC said:

"It seems ... that 62 percent of young lawyers in New South Wales admit to having lied at least once in a way that effectively defrauded a  client." 

The young lawyers blamed billing pressure from "senior staff'".

If all that is substantially correct, then, assuming the criminal justice system worked even-handedly, one should expect to see lots of arrests inside and outside the offices of law firms. 

The end result would be lots of lawyers doing time. 

However, as Justice Ray Finkelstein of the Federal Court said of our criminal justice system in June last year: 

"It is a system where people who have a good background and no need to cheat and no need to steal get treated very leniently when compared with people who come from a miserable background, probably starving to death, have learned to cope in the only way they know how, which is to steal and rob and get treated seriously harshly."  

Not that the Fink specifically mentioned lawyer billing fraud. One can only expect so much, even of a "parting shot" judicial retirement pronouncement, which that was. 

When "industrial scale overcharging" by the Keddies law firm was exposed, no one talked about lawyers engaging in theft or obtaining by false pretences or fraud or conspiracy to defraud.

Nor did anyone talk about a conspiracy within the legal profession to "decriminalise" those offences when committed by lawyers in a billing context. 

"Everyone does it," becomes the catchcry (see here at page 719 in particular, with its excellent analysis of the overcharging slippery slope: "We do not wake up one morning and decide to become crooks"). 

"Overcharging" morphs into "perfectly proper professional conduct" and as the High Court has (unanimously) said in a different context: 

"A solicitor could hardly be held guilty of a crime in respect of conduct which is recognised by the law as perfectly proper professional conduct." 

For ordinary overcharging, all that happens is that bills are re-assessed once fraud (ie non-fraud) is exposed.

In Ireland, in "very high cost criminal cases" (See Tulkinghorn January 17) it has now been established that 80 percent of the bills to legal aid involved overcharging. (See How lawyers over-claimed £22m in fees). 

Who knows what a similar investigatory exercise would uncover in Australia? 

While ordinary overcharging is perfectly proper, there comes a stage when it gets "gross".

Gross overcharging is not treated as criminal in terms of the McPherson analysis, but may attract disciplinary attention.

Council of the Queensland Law Society Inc v Roche (2003) gives a good idea of where "gross" kicks in. In that case what should have been a maximum of around $240,000 was inflated to $620,000. 

The Queensland Chief Justice said that the practitioner concerned was basically "a person of integrity and honesty".  

I guess he must have woken-up one morning and been naughty and then have been nice again.

In 2010 the NSW Legal Services Commissioner said it was pointless for him to send off files to the police to be actioned because the police would just send them back for disciplinary action instead.

 "If I think of a matter as theft, I have to refer it to the police, who would then refer it back to me as overcharging." 

Elizabeth Harris of Allocatur, a firm engaged by corporates to negotiate and monitor their legal spend, has said that in Australia there has been extraordinarily little discussion about the ethical implications of padding bills, adding that:

"The Americans are starting to treat this seriously, with a number of cases where criminal action has been taken against lawyers shown to have charged for time they did not actually spend working on a matter." 

Some lawyers in the Keddies law firm were, according to them, working more than 24 hours a day. 

"Forensic accountant, Paul Hennessy, examined the itemised bills for about 30 of Keddies' previous clients. He says he noticed that some of the lawyers had charged clients for more than 24 hours in one day ... A number of people at Keddies, at a senior level, had charged more than 24 hours for a day's work."

It appears that members and employees of law firms never engage in conspiracy to defraud even when they do.

So what happens to other people in Australia when they "overcharge"?

"Supermarket giant Coles was yesterday fined $15,000 after admitting it offered for sale hundreds of underweight pre-packaged meat trays ... For the most part these discrepancies amounted to 'a potential overcharge to the consumer of between three cents and six cents'.On one occasion the marked weight amounted to a potential overcharge of nearly $7." 

See report. 

Then there is welfare fraud by non-lawyers.

For example, in Victoria, Janet Anne Milne, 50, in 2001 admitted falsely claiming $172,596 in social security benefits over 18 years.

Some Keddies lawyers wouldn't have taken 18 years to achieve a result like that. She received two years jail, but to be released after six months. 

In 2001 a Brisbane dentist, who falsified Medical Benefit Fund claims on 62 occasions over two years  to get $31,272, was given a totally suspended two-and-a-half year jail term. 

Also in 2001, a Queensland pharmacist got four-and-a-half year's jail for nearly $390,000 of pharmaceutical benefits fraud. 

In 1997 the Australian Law Reform Commission noted that (for young people): 

"Diversion is an important aspect of many criminal justice systems throughout the world. Australia is no exception. Young people suspected of offences are increasingly being diverted from formal court adjudication through mechanisms such as cautioning and family group conferences." 

Lawyers have effectively set-up diversion schemes in respect of "McPherson" criminal overcharging.

They are called "disciplinary tribunals". Concepts like "charges and fines" (but never "jail") are used to hint at criminal processes, but that is not what is going on.

So what is going on? This is what the NSW Bar Association says: 

"Legal profession disciplinary proceedings are a special type of proceedings, the jurisdiction in respect of which is neither (a) criminal, nor (b) comparable to ordinary civil proceedings ... They generally involve 'a strong adversary flavour' even if taking the form of an inquiry rather than proceedings on information ... They may be conducted in whatever manner the court exercising disciplinary jurisdiction in the particular case considers appropriate to that case." 

Any the wiser? You're not meant to be.