Idea was put forward in ACL’s response to CJC consultation on Solicitors Act reform
A pre-action protocol run through an online portal, with preliminary decisions made by a panel of specialist lawyers, would be a better way to resolve lower-value costs disputes than handing them to the Legal Ombudsman (LeO), the ACL has argued.
It has also raised concern that the proposed overarching principle for solicitor-client costs disputes – that the charges be ‘fair and reasonable’ – risks a “disconnect” with the approach to inter partes assessments.
The ACL’s detailed response to the Civil Justice Council’s consultation on reform to part III of the Solicitors Act 1974 identified a fundamental lack of data on the volume and nature of solicitor-client assessments to inform the proposed changes.
Nonetheless, a key objective, it said, should be to develop “a readily understood, cohesive and streamlined procedure for the assessment of solicitor-client costs” – the consultation simply refers to “a readily understood and principles-based statutory code” supported by professional conduct rules.
This should start with a pre-action protocol that requires early transparency and disclosure.
The consultation response said: “Members of our working group agreed that often solicitor and client disputes arose due to a lack of knowledge, for example clients erroneously contending that they had not had fee estimates or a copy of a retainer.
“Often the position did not become clear until proceedings had been issued and an order for disclosure was made making the inspection of the files possible, at substantial cost and time to the court, the parties and their legal representatives.
“The requirement to provide a questionnaire or copies of documents where a dispute is raised as to cost would assist in resolving disputes at an early stage without issuing proceedings.”
The CJC recommended that all costs disputes worth up to £50,000 should be dealt with by the LeO. But the ACL said it was concerned that the LeO “lacks the requisite expertise and capacity to deal with costs assessments and that this would not necessarily result in more proportionate disputes”.
Instead, there should be an online portal – akin to the Official Injury Claim portal – which allows parties to exchange information and make offers. If there is no settlement, a suitably qualified lawyer from the panel – made up of Costs Lawyers, solicitors, barristers and chartered legal executives – could make a preliminary determination and refer complex matters to the court.
If a party is unhappy with the determination, the ACL recommended using the current provisional assessment regime, meaning a determination on paper and a possible oral hearing for cases worth up to £75,000; if the court does not change the panel’s decision by at least 20%, then the issuing party should bear the costs.
The response said the CJC’s proposal of an “overarching principle” that fees be ‘fair and reasonable’, judged on an objective basis, “significantly departs from the scope of the current Act and is contrary to orthodox jurisprudence” – such as the subjective element of the reasonableness test.
“As such, there is a risk of a disconnect between inter partes and solicitor-client assessments, which is especially problematic given they are often contingent upon the other; there must be a valid retainer in place between solicitor and client to ensure recovery of costs on an inter partes basis due to the operation of the indemnity principle, and the costs recovered from a party in the litigation and the costs claimable from the client result in a costs shortfall payable by the client.”
Further, if the principle was extended to contractual terms, “it could have the unintended effect of increasing the volume of solicitor-client assessments” – for example, hourly rates are currently not often challenged as they usually form part of the agreed contract.
“Solicitors should be able to agree and rely upon specific contractual terms with prospective clients to ensure that the regulatory objective of promoting competition in the provision of services is upheld,” it added.
The ACL recommended that the ‘fair and reasonable’ principle should apply only to the amounts actually charged.
The response also set out proposed changes to the SRA Code of Conduct – which at present barely mentions costs – and warned that, if the CJC decides to proceed with mandatory ADR for costs disputes worth over £50,000, “then the significant imbalance between sophisticated legally represented solicitors and often unrepresented lay clients should be addressed to ensure that the mediator is not simply a referee in an unfair fight”.
ACL Council member Amy Dunkley (pictured), who sits on the ACL’s policy committee that drafted the response, said: “There is no doubt that the Solicitors Act needs updating but our analysis of the consultation paper shows omissions that need to be addressed – such as solicitors seeking payment of bills as debts.
“Everyone is concerned that the LeO is a long way from even being in a position to think about taking on costs disputes, but work on our model of a pre-action protocol and expert panel could begin at once and would likely have much the same impact.
“The CJC should be cautious when amending or repealing elements of the statute. The Solicitors Act 1974 consolidates case law that has built up over 200 years and abolishing large sections could render agreements unlawful as an unintended consequence. As experts in the field, we stand ready to assist.”