Warnings on Costs Information, Fees Recovery and Transparency Rules

costs information, fee recovery, fees, transparency rules, SRA

Ensuring Costs are Paid

There have been a number of warnings in the legal press recently in relation to ensuring that firms are paid for the work they undertake. Most notably has been the recent ruling that Irwin Mitchell would not be entitled to claim a sum in excess of £200,000 in respect of its substantial costs claim in relation to a major personal injury matter.

This decision was based on the grounds that the litigation friend had not been properly updated on the rising costs of the matter. The firm had in fact informed the litigation friend that the court had “now” set a budget at a point in 2020, whereas in fact this figure had been set several years beforehand. This led to the criticism that the firm had failed to advise their client representative of the mounting costs budget as the matter progressed and as required.

The particular failings in this case were the firm’s failure to monitor the developing costs position and then to advise the client before the costs targets, as already advised, were exceeded. The responsibilities to do so are now to be found in the SRA Code of Conduct for Solicitors at section 8.7 which provides that firms must:

“… ensure that the clients receive the best information possible about how their matter will be priced and, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of the matter and any costs incurred.”

This requirement is similar to, but more simply stated than, the previous professional rules on the issue of costs information in the 2011 Code of Conduct and the 2007 version of the earlier rules before that. The most important point to bear in mind is that sending the client regular bills or notification of the costs position to date will not in itself ensure compliance with these requirements. This is because the costs information must also be forward looking and so project the client’s future likely costs exposure, as well as notifying any fees and costs to date.

This principle spawned a number of notable costs cases in years gone by, including that of Wong v Vizards 1997 where the court’s requirements, much in line with the professional rules then and now, were stated as:

“Mr Wong has just cause for complaint if, after seeking a reliable estimate from his solicitors as to his potential costs exposure before deciding to take the matter to trial, he should then be required to pay a far greater amount without further warning or a proper explanation.”

This case is also remembered for the suggestion that where a firm had failed to update its costs advice to the client, they would be limited to the figure already provided plus the “Wong allowance” of no more than 15% of that figure for the costs since incurred. Another notable decision from the time which it would be wise still to take into account is that of Reynolds v Stone Rowe Brewer 2008. In this case the increasing trial costs in a building dispute had been notified to the client in advance, but were eventually so much greater than had been proposed at the outset of the matter that the view was taken that that first estimate could not have been valid, and so most of the uplift was disallowed.

Website Transparency Requirements

On a related issue there also seems to be increasing pressure for the requirements on advance costs information on firms’ websites, with the SRA Transparency Rules already requiring firms to provide costs information on those services that are listed at rule 1.3. These include conveyancing, probate and unfair dismissal claims in employment law. We have found of late that some of our member firms that do not provide any of these listed services have overlooked these requirements but that, regardless of the particular range of services that are provided by the firm, details of the firm’s complaints handling information must also be provided in all cases in accordance with rule 2.1.

An article on this issue in the Times of the 11th July reported that “old-school high street solicitors” would still “bristle at references to consumers” and would instead “trenchantly” describe them as clients nonetheless. This rather overlooks that the terminology contains an important distinction: a consumer purchases goods or services that they can evaluate as readily as the shop or the service provider, whereas one of the essential aspects of a professional service is that the consumer (aka client in this context) will need to be advised on whether it is in their interests to proceed with the matter as well. It is disappointing to see this critical distinction being disregarded in this way.

For the time being at least this can be placed in the “one to watch” box, but it is worth noting that the SRA is coming under pressure from consumer bodies to enforce their Transparency Rules for the time being, and to perhaps extend them in the future.

Another factor to bear in mind here is the extent of the information provided with many firms still not dealing with all of the costs requirements which go beyond the mere amount that will be charged, but just as importantly what that amount will and will not include by way of services.  Rule 1.5 of the Transparency Rules specifically provides that the costs information must include not just information as to the costs of the service (including the basis of the charge) but must also include:

  • the experience and qualifications of anyone carrying out the work, and of their supervisors,
  • details of what services are included in the price,
  • the key stages of the matter
  • the likely timescales for each stage, and
  • details of any services that the user might reasonably be expected to be included in the price displayed, but which are not.

In other words:

  • simply having a list of partners or solicitors who supervise work and not referring to paralegals undertaking the work on a day by day basis would likely not be sufficient,
  • not specifying in some detail what is involved in a matter would not be sufficient
  • not breaking a matter down into key stages – e.g. instructions/pre-exchange/pre-completion/post-completion
  • not giving a time estimate for each of those stages – very difficult to do in many areas but stating an average might help
  • think about the process from the point of view of the user – e.g. if a probate does not include the costs for conveying a property forming part of an estate or paying the fees of overseas lawyers.

Finally in relation to costs, be wary of fee calculators as an alternative to stating a price range.  The SRA guidance on this topic states that:

“If using an online quote generator, this must produce a quote without requiring any additional contact, for example someone calling to discuss the quote.”

In other words, if the price cannot be ascertained without first speaking to the firm, then it does not satisfy the Transparency Rule requirements.

Complaints Information on Websites

By way of a cautionary note for now, however, we have found that many of our member firms might have updated their reference to the complaints handling time limits in place at the Legal Ombudsman’s office as of April this year, but have failed to do so in the reference to their complaints handling process on their website. We covered this in our Compliance Bulletin (Newsletter) in February this year which you will find in the “Information Resources” section of our website under the “Compliance Bulletins” tab, but by way of a recent example the firm had stated on the website:

“You should be sure to take a complaint to the Legal Ombudsman within six months of receiving a final written response from us about your complaint and within six years of the act or omission complained of, or three years from when you should have known about the complaint.”

Whereas this should now read as:

“You should be sure to take a complaint to the Legal Ombudsman within six months of receiving a final written response from us about your complaint and within one year of the act or omission complained of, or one year from when you should have known about the complaint.”

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