Costs information and client care -- consultation paper

INTRODUCTION1.

This consultation paper canvasses views on the Council's proposal that the current practice rule 15 (client care) and the costs information requirements contained in the written professional standards (WPS) should be combined within a single code (see pages 27 and 28) attached to a new practice rule 15.WHY CHANCE?2.

Figures from the former Solicitors Complaints Bureau (SCB) show that 60% of cases of inadequate professional services (IPS) involved disputes over costs.

Outside commentators have continued to argue that the Society should do more to ensure that clients are fully informed about costs in advance.

The Legal Services Ombudsman, the National Association of Citizens Advice Bureaux, the National Consumer Council, Lord Woolf's report on civil justice 'Access to Justice' and the new government have all advocated this.3.

If Lord Woolf's proposals are implemented, rules of court may provide that solicitors can charge their clients more than the fixed inter partes costs where their clients have agreed in writing at the outset to pay a higher amount.4.

The Council considered that it is important that whatever the content of the requirements on costs information, their place in the regulatory system should be clear and easily understood.

At present, there is some confusion.

The written professional standards stand alone and a material breach is treated as establishing prima facie an inadequate professional service.Some believe that practice rule 15 on client care includes the costs information requirement Others are not aware that there is a potential conduct sanction for serious or per sistent breaches of the current standards notwithstanding the fact that they do not form part of a practice rule.THE COUNCILS APPROACH5.

The key objective of the costs information requirement is, in the view of the Council, to ensure that clients receive appropriate information about costs in as many cases as possible, and that there are appropriate remedies for clients when they do not receive such information.6.

The Council's preferred approach is to amend practice rule 15 to require solicitors to observe a code incorporating both client care and costs information requirements.

This has the advantage that there is no change to the status quo in terms of sanctions and remedies, but a clear message is given that the Society takes the issue seriously.

It will mean that both conduct and IPS sanctions and remedies will continue to be available.

The code is longer than the written professional standards because it seeks to be more specific about what is meant by giving the best information possible about costs.

At present there are various grey areas where confusion and difficulties in interpretation can arise.7.

The Society will be publishing later this year a series of model terms of business and costs agreements, to assist practitioners to provide costs information to clientsCONSULATION8.

The Law Society's Council wishes to consult the profession and other interested bodies prior to making changes either to the existing requirements or to practice rule 15.

It decided that the consultation should take place by sending this paper to local Law Societies and other interested bodies and through publication in the Gazette.It is anticipated that the Council will consider these issues again at its July meeting.

Any changes made by the Council to the existing requirements will then need to be considered by the Lord Chancellor's Advisory Committee on Legal Education and Conduct under the procedures laid down by the Courts and Legal Services Act 1990.

The concurrence of the Master of the Rolls will be required for any changes to the Solicitors' Practice Rules.THE CODE9.

The approach taken in the code is to make clearer what is meant by giving the best information possible about costs.

The main changes from the WPS are:-- all costs information, whether given at the outset or from time to time, should be confirmed in writing;-- information should be given both about the basis of charging and the best information possible about the likely overall costs;-- reference is made to the risk of having to bear an opponent's costs as part of the analysis of benefit and risk;-- a timetable for updating costs information is included together with a requirement to consider the client's eligibility for legal aid if there is a material change in the client's means;-- a requirement to inform the client immediately in writing before a costs estimate is likely to be exceeded, or of any changed circumstances which may affect the costs, risks or benefits of continuing with the matter; and-- the client care requirements of practice rule 15 have been incorporated into the draft code with minor revision.10.

The proposed code does not seek to change existing policy but to make the obligations clearer and better understood.

Before making any changes the Council wishes first to seek the views of the profession.

Comments are sought on the proposed amended practice rule and the draft code, outlined on pages 27 and 28.11.

Comments are invited on whether the proposed code should contain the requirement in paragraph 4(c)(iv) that where it is not possible to agree a fee or give a realistic estimate or general forecast of the overall costs, solicitors should give the best information possible about the costs of the next stage of the matter.YOUR VIEWS12.

The Law Society's Council would be interested to hear any comments on both-- the overall approach, and-- detailed provisions13.

Please send comments to: Rachel Rogers, The Law Society's policy directorate, 113 Chancery Lane, London WC2A 1PL, OX 56 London/Chancery Lane to be received no later than Friday 20 June 1997.NEW RULE 15 AND THE SOLICITOR'S COSTS INFORMATION AND CLIENT CARE CODENEW RULE 15Rule dated [1997] made by the Council of the Law Society with the concurrence of the Master of the Rolls under section 31 of the Solicitors Act 1974 and section 9 of the Administration of Justice Act 1985.On [six months after notification of the Lord Chancellor's approval under the Courts and Legal Services Act 1990 Schedule 4], delete rule 15 of the Solicitors' Practice Rules 1990 (client care) and replace with the following:Rule 15 (costs information and client care)'Solicitors shall give information about costs and other matters, and operate a complaints handling procedure, in accordance with a Solicitors' Costs Information and Client Care Code made from time to time by the Council of the Law Society with the concurrence of the Master of the Rolls.'THE CODECode dated [six months after notification of the Lord Chancellor's approval under the Courts and Legal Services Act 1990 schedule 4] made by the Council of the Law Society with the concurrence of the Master of the Rolls under Rule 15 of the Solicitors' Practice Rules 1990, regulating the English and Welsh practices of solicitors, registered foreign lawyers and recognised bodies, in giving information to clients and operating complaints procedures.1.

Introductiona) This code replaces the written professional standards on costs information for clients (see paragraphs 3 to 6 of the code) and the detail previously contained in practice rule 15 (client care) (see paragraph 7 of the code).b) One of the main objects of the code is to make sure that clients who are unfamiliar with the law and lawyers are given the information they need to understand what is happening generally and in particular to make sure that clients are given adequate information on: (i) the costs of legal services, both at the outset and as a matter progresses; and(ii) responsibility for clients' matters.c) The code also requires firms to operate a complaints handling procedure.d) It is good practice to record in writing all decisions relating to costs, in particular, decisions not to provide information required by the code.e) A material breach of the code will be treated by the Office for the Supervision of Solicitors (OSS) as establishing, prima facie, an inadequate professional service.

Serious or persistent breaches can also lead to a finding of professional misconduct, that is, a breach of practice rule 15.f) The powers of the OSS on a finding of inadequate professional services include:(i) disallowing all or part of the solicitor's costs; and(ii) directing the solicitor to pay compensation to the client up to a limit of £1000.2.

Applicationa) The code is of general application.

However, some of the principles may not be appropriate in every case, eg for regular commercial clients, and solicitors should consider the interests of each client in deciding which principles to apply in the particular circumstances.b) The full information required by the cod e may be inappropriate, eg: in every case, for a regular client for whom repetitive work is done, where the client has already been provided with the relevant information, although such a client should be informed of changes; and(ii) if compliance with the code may at the time be insensitive or impractical.

In such a case relevant information should be given when circumstances change.c) Employed solicitors should have regard to paragraphs 3 to 6 of the code where appropriate, eg when acting for clients other than their employer.

Paragraph 7 does not apply to employed solicitors.d) Solicitors should comply with paragraphs 3 to 6 of the code where clients are legally aided and may have a financial interest in the costs because contributions are payable or the statutory charge will apply or they may become liable for the costs of another party.e) The code applies to contingency fee and conditional fee arrangements as it does to any other basis of charging.f) The code applies to arrangements with the client relating to the receipt by solicitors of commissions from third parties.3.

Informing the client about costsa) Costs information must not be inaccurate or misleading.b) Any costs information required to be given by this code must be given clearly, in a way and at a level which is appropriate to the particular client.Any terms with which the client may be unfamiliar, eg 'disbursement', should be explained.c) The information required by paragraphs 4 and 5 of the code should be given to a client at the outset, and at appropriate stages throughout the matter.

When given orally, it should be confirmed in writing as soon as possible on accepting instructions.4.

Advance costs information -- general-- The overall costsa) Solicitors should give clients the best information possible about the likely overall costs, including fees, VAT and disbursements.b) Where relevant to the likely overall costs, solicitors should explain clearly to clients the time which may be taken in dealing with a matter.c) Giving 'the best information possible' includes:(i) agreeing a fixed fee; or(ii) giving a realistic estimate; or(iii) giving a general forecast within a possible range of costs; or(iv) explaining to the client the reasons why it is not possible to agree a fee or give a realistic estimate or general forecast of the overall costs, but giving instead the best information possible about the cost of the next stage of the matter.d) Solicitors should, in appropriate cases, explain to privately paying clients that they may set an upper limit on the costs which may be incurred by the firm in relation to a matter without further authority, and what the consequences are of setting a limit.

Solicitors should not exceed an agreed limit without first obtaining the client's consent.e) Solicitors should make it clear at the outset if an estimate is not intended to be a fixed fee.

-- Basis of firm's chargesf) Solicitors should also explain to their clients how their charges are made up except where the overall costs are fixed or clear.

If the basis of charging is an hourly charging rate, that must be made clear.

Clients should be told if charging rates may be increased.-- Further informationg) Solicitors should explain what reasonably foreseeable payments a client may have to make either to the solicitor or to a third party and when those payments are likely to be needed.h) Solicitors should discuss with clients the arrangements for updating the costs information, eg reviewing costs estimates at specified intervals or s tages, or submitting interim bills.Client's ability to payi) Solicitors should discuss with clients how any legal costs are to be met and consider: whether the client may be eligible and should apply for legal aid (including advice and assistance);(ii) whether the client's liability for costs (including the costs of another party) may be covered by insurance; and(iii) whether the client's liability for costs (including the costs of another party) may be paid by another person, eg an employer or trade union.-- Cost -- benefit and riskj) Solicitors should discuss with clients whether the likely outcome in a matter will justify the expense or risk involved including, if relevant, the risk of having to bear an opponent's costs.5.

Additional information for particular clients-- Legally aided clientsa) Solicitors should explain to legally aided clients their potential liability for their own costs and those of any other party including the following:(i) the effect of the statutory charge and its likely amount;(ii) the client's obligation to pay any contribution assessed and the consequences of failing to do so;(iii) the fact that the client may still be ordered by the court to contribute to the opponent's costs if the case is lost even though the client's own costs are covered by legal aid; and(iv) the fact that even if the client wins, the opponent may not be ordered to pay or be capable of paying the full amount of the client's costs.-- Privately paying clients in contentious mattersb) Solicitors should explain to clients the clients' potential liability for their own costs and for those of any other party, including:(i) the fact that the client will be responsible for paying the firm's bill in full regardless of any order for costs made against an opponent;(ii) the probability that the client will have to pay the opponent's costs as well as the client's own costs if the case is lost;(iii) the fact that even if the client wins, the opponent may not be ordered to pay or be capable of paying the full amount of the client's costs; and(iv) the fact that if the opponent is legally aided the client may not recover costs, even if successful.6.

Updating costs informationSolicitors should keep clients properly informed about costs as a matter progresses.

In particular, solicitors should:(i) tell the client how much the costs are at regular intervals (at least every six months) and deliver interim bills in appropriate cases;(ii) explain to the client (and confirm in writing) any changed circumstances which will, or which are likely to affect the amount of costs, the degree of risk involved, or the cost-benefit to the client of continuing with the matter;(iii) inform the client in writing as soon as it appears that a costs estimate or agreed upper limit may or will be exceeded; and(iv) consider the client's eligibility for legal aid if there is a material change in the client's means.7.

Client care and complaints handlingThe following provisions apply only to solicitors and principals in private practice.-- Information for clientsa) Every solicitor shall ensure that the client:(i) is given a clear explanation of the issues raised in a matter and is kept properly informed about its progress;(ii) is given the name and status of the person dealing with the matter and the name of the principal responsible for its overall supervision; and(iii) is told whom to contact about any problem with the service provided.-- Complaints handlingb) Every principal shall:(i) ensure the client is told whom to contact about any problem with the service provided;(ii) have a written complaints procedure and ensure that complaints are handled in accordance with it; and(iii) give the client a copy of the complaints procedure on request.