A recent SDT case underlined the importance of ensuring charges are not confusing or opaque.

Outcomes-focused regulation has been with us for a couple of years, and practitioners have been pondering its practical effect. Will it loosen regulation, to allow lawyers to try alternative ways of delivering services, or will it simply impose more rules to comply with? In one of the first important cases dealing with the new rules, the Solicitors Disciplinary Tribunal suggests that it will be a bit of both, and the benchmark test is the effect on the client.

The text of SRA v Andersons is available on the SDT website, and the appeal is at [2013] EWHC 4021. It concerns conveyancing charges, but the principles apply to all contentious and non-contentious work. The firm in question, Andersons of Croydon, has now closed and has no connection with any firm with a similar name.

The facts of Andersons

The firm gave quotes to potential clients in four stages:

  • First, its website offered conveyancing ‘from £495 + VAT’.
  • Then, when a client phoned, it offered a price (in one example, £455 + VAT and disbursements).
  • This was followed up by an email or letter which confirmed this ‘headline price’, contained basic advice about the transaction, including reference to some fees, but also referred to a terms and conditions booklet.
  • The terms and conditions booklet described a range of extra fees, varying from fees which would always be required in that price range, such as for professional indemnity insurance or completing the stamp duty form, to fees which would occasionally be required, such as a fee for arranging indemnity insurance for restrictive covenants.

There was also a separate ‘Code of Conduct’ sheet which contained client care details. Finally, there was yet another sheet headed ‘Instructions to Solicitor’. This mentioned the headline price, the disbursements and a few extra charges (but not all) which the client was required to sign and return.

The combined effect of these fees meant that some clients expecting a bill of about £455 were eventually presented with a bill for £1,700 or more.

The decision

The tribunal decided that this practice had breached the Solicitors Code of Conduct 2011 and the partners were fined £1,000 each plus costs. On appeal, the High Court increased these fines to £15,000 for the firm and £5,000 each for the individual partners plus costs.

The tribunal said the firm’s procedure was inadequate because major charges were being left out of the initial quote to the clients, which the firm knew would have to be paid, and the client was entitled to know at the outset what these would be.  Moreover, the tribunal said that by so doing the firm had intended to put it in a position whereby it could give clients a low ‘headline quote’ which would encourage clients to use their services – something the firm has always denied.

Two points stand out from the tribunal’s judgment. The first is that clients are not expected to read the  firm’s terms and conditions as carefully as a lawyer would. One client, a teacher whose evidence the tribunal found very cogent, admitted that he had not read the terms and conditions booklet very carefully but said that even if he had, it would not have been clear that extra charges were payable. Others had merely ‘skim-read’ them.  

The second point is the approach the tribunal took to the firm’s charges for advising on joint ownership. Andersons had argued that advising on joint ownership was an important issue and one that merited a fixed charge of £225 + VAT.

Its method of dealing with this was to issue clients with two pages of standard notes giving advice on the conflicting merits of joint tenancies or tenancies in common, the various alternatives for the latter, and including a ‘reply’ form where the clients could state their choice or ask for further advice. The expert witnesses in the case (of whom I was one) agreed that it was well-written and clear.

There is an important point of principle here. Are solicitors entitled to charge extra for advice which is cogent and appropriate, but not geared to a particular client, or only for advice which is specifically targeted to the client you are advising? The tribunal came down strongly in favour of the second viewpoint: without actual face-to-face advice the work did not warrant an extra charge.

What information must be supplied to clients?

The expert witnesses agreed that most solicitors followed Andersons’ practice of quoting a ‘headline price plus extras’. In other words, a variable fee based on the value of the transaction and any complicating factors (freehold or leasehold, shared ownership) plus a menu of extras for bank transfer fees, joint ownership advice and so on. Some solicitors quote on a time basis, or time-plus-value basis, but this is unusual.

Some operate no sale, no fee; others do not. Virtually all will charge extra if the transaction becomes unexpectedly complex, for example if a dispute arises. We also agreed that Andersons’ charging structure, which imposed 25 separate charges for different items, was more complex than most.

The thrust of the tribunal’s decision is that charges must not be confusing or opaque. All major heads of charge, which will be apparent to the solicitor at the outset, must be quoted in the initial phone call or email, as must all expected disbursements. Quoting a low headline price to tempt the client in, while hiding extra charges in additional terms and conditions, will not be tolerated.

Conclusion

The spirit of outcomes-focused regulation – to look at the result of solicitors’ actions on clients and others, rather than whether they comply with a set of rules – seems to be being applied rigorously by the tribunal and the courts. If this results in a higher standard of service to clients (which is the stated intention), then it may lead to greater appreciation of solicitors by clients. And that, if it can be achieved, is something that will benefit us all.

Phil Palmer is a partner at QualitySolicitors Palmers and an expert witness in conveyancing