Ethics and Professional Conduct – 4ed (2024) Chapter 5 Client Care and Costs

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Questions and Answers

What is the primary reason firms prioritize maintaining client relationships?

  • To encourage staff loyalty.
  • To exceed regulatory compliance.
  • To prevent clients from seeking services from competitors. (correct)
  • To simplify administrative tasks.

According to the SRA Code of Conduct for Solicitors, what is the overarching principle that a solicitor must uphold regarding client interests?

  • To act in accordance with the solicitor's own financial interests.
  • To act in the best interests of each client. (correct)
  • To maintain a professional distance from clients.
  • To avoid potential conflicts of interest at all costs.

What should a solicitor do to ensure clients can make informed decisions?

  • Give information in a way clients understand and ensure they are in a position to make informed decisions. (correct)
  • Rely solely on the client's understanding of legal jargon.
  • Provide complex legal documents without explanation.
  • Limit the amount of information to avoid overwhelming the client.

What is the correct understanding of a solicitor's responsibility regarding client matters?

<p>To keep the client informed of progress and seek instructions where required. (D)</p> Signup and view all the answers

According to the SRA Code of Conduct for Solicitors, what is expected regarding the continuous development of a solicitor's skills?

<p>Solicitors must maintain their competence and keep their professional knowledge and skills up to date. (C)</p> Signup and view all the answers

What must a solicitor do to ensure a proper level of service is provided by those they supervise?

<p>Supervise based on individual capabilities, and ensure their knowledge and skills are up to date. (A)</p> Signup and view all the answers

What information about the services provided must a solicitor convey to the client?

<p>Whether the services are regulated and by whom. (B)</p> Signup and view all the answers

What is the solicitor's obligation regarding regulatory protections available to clients?

<p>To ensure clients understand the regulatory protections available to them. (C)</p> Signup and view all the answers

What information should a solicitor provide to a client to enable them to make an informed decision about legal services?

<p>The best possible information about how their matter will be priced and the likely overall cost. (B)</p> Signup and view all the answers

What is a recommended practice for solicitors regarding fees, and what should they avoid doing?

<p>Solicitors should clearly explain how fees are calculated and if and when they are likely to change. (B)</p> Signup and view all the answers

A solicitor quotes an hourly rate to a client but forgets to mention VAT. If the client is liable to pay the bill, how will the price be interpreted?

<p>The price the client pays will be deemed to include VAT. (A)</p> Signup and view all the answers

When discussing the potential outcomes of a matter, what should a solicitor consider?

<p>Whether the potential outcomes justify the expense and risk involved, including the risk of paying the other party's legal fees. (B)</p> Signup and view all the answers

What are the solicitor's obligations when sending a client care letter?

<p>The letter's primary purpose is to inform the client in a client-friendly way. (A)</p> Signup and view all the answers

Under what circumstances would a contract with a solicitor fall under the definition of an 'off-premises' contract according to the Consumer Contracts Regulations?

<p>When a solicitor visits a client at home and the client offers to engage the solicitor to carry out legal work there. (D)</p> Signup and view all the answers

What is the key distinction between 'contentious' and 'non-contentious' business for solicitors, and when does contentious business begin?

<p>Contentious business involves work done in relation to proceedings; it starts only once proceedings have been issued. (D)</p> Signup and view all the answers

A client seeks advice from a solicitor regarding suing their previous firm for negligence. The solicitor suggests sending a letter before action, giving the firm seven days to offer compensation. If the firm makes an acceptable offer before proceedings are issued, how will the solicitor's work be classified?

<p>Non-contentious business. (D)</p> Signup and view all the answers

What is hourly rate?

<p>A common method of charging clients where they are charged for the time spent on the file (C)</p> Signup and view all the answers

A solicitor agrees to complete work for a client for a fixed fee. If the work turns out to be more expensive than initially expected, can the solicitor alter the fee?

<p>No, the fee cannot be altered at a later date unless the client agrees. (A)</p> Signup and view all the answers

In what specific types of proceedings is a solicitor prohibited from entering into a Conditional Fee Agreement (CFA)?

<p>Any criminal work or family proceedings. (C)</p> Signup and view all the answers

Under a Damages-Based Agreement (DBA), what is the maximum amount a solicitor can receive, including VAT, from the sums ultimately recovered by the client in a personal injury case?

<p>25% of the general damages recovered. (B)</p> Signup and view all the answers

A solicitor agrees to accept shares in a new company in return for their work rather than costs. What additional step should the solicitor advise their client regarding this arrangement?

<p>Seek independent advice about such a costs agreement. (A)</p> Signup and view all the answers

Under what circumstance may a solicitor terminate a retainer in contentious business if the client does not pay money on account?

<p>If the client does not pay this money within a reasonable time (C)</p> Signup and view all the answers

What must a solicitor do if they require money on account before starting work in a non-contentious matter?

<p>Make this a requirement of the retainer. (C)</p> Signup and view all the answers

Which of the following is NOT a formal requirement for a solicitor's bill to be valid for payment?

<p>The bill must include a forecast of potential future costs. (C)</p> Signup and view all the answers

A solicitor wishes to bill a client for work done on the client's file over several months in a protracted litigation case and wants to be able to sue for none payment if this happens. What type of interim bill should a solicitor use?

<p>Interim Statute Bill (C)</p> Signup and view all the answers

In a non-contentious matter, when can a solicitor begin charging interest on an unpaid bill, assuming the client has been given notice of their right to challenge the bill?

<p>One month after delivery of the bill. (B)</p> Signup and view all the answers

Under what extraordinary circumstances can a solicitor commence a claim to recover costs from a client sooner than one month after delivering the bill?

<p>When the client is about to leave the country or take actions that would prevent or delay the solicitor obtaining their fees. (D)</p> Signup and view all the answers

Within what timeframe must a client apply to have a solicitor's bill assessed by the court without needing the court's permission?

<p>One month from the date of delivery. (C)</p> Signup and view all the answers

When a bill is assessed by the court, on what basis are the costs assessed?

<p>On an 'indemnity basis', resolving any doubt as to what is reasonable in favour of the solicitor. (D)</p> Signup and view all the answers

What should solicitors ensure regarding clients complaints?

<p>Solicitors must ensure that clients are informed in writing at the time of engagement about their right to complain (D)</p> Signup and view all the answers

Rex has just received a final bill from his solicitor in respect of a partnership dispute that was resolved without issuing proceedings. Rex thinks the bill (£7,000 plus VAT) is too high. Assuming that the bill complies with the relevant formalities, what TWO immediate options are available to Rex to challenge the bill?

<p>Assessment by the court and using the firm's complaints procedure (D)</p> Signup and view all the answers

Under a non-contentious business agreement, how can a solicitor be remunerated?

<p>By a gross sum, commission, a percentage, a salary, or otherwise. (D)</p> Signup and view all the answers

In instances where a solicitor has complied with relevant provisions under s 57 Solicitors Act 1974, can the client apply to court to assess a bill?

<p>No, the client will be unable to apply to have the bill assessed by the court but the court may set the agreement aside if the amount charged by the solicitor is unfair or unreasonable. (B)</p> Signup and view all the answers

What type of fee arrangement is prohibited from inclusion in a contentious business agreement?

<p>Contingency fee. (B)</p> Signup and view all the answers

What action must a costs officer take if they reduce the amount of a solicitor's bill by more than 50% in a non-contentious matter?

<p>Inform the SRA. (D)</p> Signup and view all the answers

According to paragraph 4.1, what is a solicitor obliged to properly account to a client for and what's is included in the financial benefit term?

<p>The solicitor must not make a secret profit whilst acting for the client, including any commission, discount or rebate (SRA Glossary) (A)</p> Signup and view all the answers

A solicitor refers a client to a tax consultant and receives a commission. What are the acceptable ways for the solicitor to properly account for this financial benefit to the client?

<p>Pay it to the client; or offset it against fees; or keep it where the client has agreed to this. (B)</p> Signup and view all the answers

In the case of Reynolds v Stone Rowe Brewer [2008] EWHC 497 (QB), what principle did it establish regarding costs estimates provided by solicitors?

<p>Solicitors are bound by their original cost estimate unless justified by changes. (D)</p> Signup and view all the answers

Which of the following scenarios represents a blatant breach of Principle 7 (acting in the best interests of the client) and Principle 5 (acting with integrity)?

<p>A solicitor overcharges a client, inflating hours worked and costs incurred. (B)</p> Signup and view all the answers

How could a solicitor show accounting to a client for a financial benefit

<p>Pay it to the client; or offset it against fees; or keep it where the client has agreed to this (A)</p> Signup and view all the answers

A solicitor advises a wealthy client to invest in a highly speculative and risky venture in which the solicitor holds a significant undisclosed stake. The client loses a substantial amount of money due to the venture's failure. Which of the following principles is MOST severely violated?

<p>The solicitor acting in the best interests of the client and with integrity. (A)</p> Signup and view all the answers

A solicitor's firm implements a policy of automatically adding a 15% 'administration fee' to all client bills without explicitly informing clients about this fee in their initial engagement letters, nor is it transparently itemized on the bills. The firm argues that this fee covers necessary overhead costs and is standard practice. Which overarching ethical principle is MOST compromised by this practice?

<p>Acting with transparency, providing the best possible information about costs, and obtaining informed consent. (C)</p> Signup and view all the answers

Flashcards

Client Care

The minimum standard of service a client can expect from a solicitor as per the Code of Conduct.

Informed client decisions

A solicitor must give clients understandable information, enabling them to make informed decisions.

Definition of 'Costs'

The costs amount to include solicitor's fees and disbursements.

Information about legal costs

The client must receive the best possible information about matter costs.

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Client Care Letter

A way of providing client care in writing after a client interview.

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Conditional Fee Agreements (CFAs)

Agreements which are permitted by law that provide clarity around the payment of fees, such as 'no win no fee'.

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Money on account

A sum of money paid by a client to a solicitor at the start of a transaction for incurred costs and disbrusements.

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Solicitor's bill

An account must be delivered to a client to obtain payment.

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Contentious Business

Business done for proceedings before a court or arbitrator.

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Commissions and secret profits

A fiduciary relationship must be maintained, and solicitors must not secretly profit whilst acting for the client.

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Right to Challenge Bill

The client has the right to challenge a solicitor's bill.

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Non-contentious business agreements

Can be used when the proceedings involve non-contentious work and the solicitor receives a set amount of remuneration.

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Contentious business agreements

An agreement whereby the solicitor includes an amount to be references by gross sum, hourly rate or salary.

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Overcharging

A breach of the solicitor's duty to act in the best interests of the client.

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Study Notes

Client Care and Costs

  • The chapter is about acting honestly and with integrity in providing legal services, maintaining trust, showing service, and handling assets.
  • The legal services market is competitive
  • Firms spend a lot on advertising, making client retention through outstanding service essential.

Introduction

  • Addresses client care, cost information, client letters, Consumer Contract Regulations 2013, fee structures, and billing matters.

Client Care

  • Solicitors must meet minimum service standards, acting in the client's best interest.
  • Solicitors should not exploit their position or mislead clients.
  • The Code isn't strict on client care systems; standards vary based on the practice and clients.
  • Solicitors are required to give understandable information to clients, enabling informed decisions about services and options.

Level of Service

  • Service must be competent and timely.
  • Solicitors must maintain current skills and knowledge.
  • Competence involves considering the client's characteristics and needs.

Responsibilities

  • Solicitors and clients each have their responsibilities which should be clearly defined at the outset.
  • Solicitors should keep clients informed and seek instructions.
  • Clients should update solicitors on relevant changes.
  • Limitations imposed by third parties, like insurers, should be explained.

Competence and Supervision

  • Solicitors must be knowledgeable in current law to serve clients effectively.
  • Solicitors need to ensure those they supervise are competent, and stay updated on ethical and regulatory obligations.
  • Managerial solicitors are accountable for supervised work.

Information on Regulation

  • It must be ensured that clients know how and if services are regulated, including the protection of the SRA Compensation Fund.
  • The SRA is the principal regulator, with the FCA involved sometimes.

Information About Costs

  • Clients need complete legal service cost information to make informed decisions.
  • Clients should be given the best, most accurate pricing info initially and as things progress
  • Costs include fees and disbursements defined in the SRA Glossary.
  • An accurate cost estimate must be provided while taking care, or it will be binding.

Costs in Litigation

  • Solicitors should discuss potential outcomes of litigation and justify expenses to the client
  • This includes the risk of paying the other party's fees.
  • Legal expenses insurance should be considered.

Client Care Letter

  • A good amount of information must be communicated to clients at the start
  • Some data is required by the SRA, other rules, and good practice
  • It's prudent to provide all client care information in writing as a letter because it can show compliance with the Code and Principles

Consumer Contracts Regulations 2013

  • Solicitors must comply with the Consumer Contracts Regulations 2013, which apply to contracts with clients
  • The requirements vary if its on or off the solicitor's premises.
  • For contracts that are off-premises, client must know they can cancel it without reason within 14 days
  • Solicitors should make sure their letters have any additional info if the contracts may vary

Fees and Costs

  • The solicitor and client must agree on fees at the start of the retainer
  • The way a solicitor is remunerated, and fees are restricted is by the SRA
  • Restrictions vary according to the work type
  • There is a distinction between contentions and non-contentious businesses

Contentious and Non-Contentious Business

  • Contentious business involves court or arbitrator proceedings, starting once proceedings are issued.
  • Non-contentious business does not involve court
  • Non-contentious business is governed by the Solicitors' (Non-Contentious Business) Remuneration Order 2009.

Options for Solicitors' Fees

  • Solicitors may charge a fee for work done in different ways. Solicitors must make sure that any arrangement is legal and the client is fully informed.
  • Hourly rates are a common way to charge
  • Fixed or variable fees are other available options

Conditional Fee Agreements (CFAs) and Damages-Based Agreements (DBAs)

  • Agreements allowed by law are Conditional Fee Agreements (CFAs) and Damages-Based Agreements (DBAs).
  • A CFA can have the client agree to charge nothing if they lose, but they pay their fees plus any agreed upon uplift if they win
  • DBA is when the solicitor's fee is an agreed percentage of the damages if a client recovers damages
  • The solicitor must carry out risk assessment to calculate success fee
  • Lawyers cannot carry out a CFA for criminal or family proceedings

SRA Transparency Rules

  • The SRA Transparency Rules also require that certain costs are included in their publications
  • Solicitors may enter a contingency fee arrangement in respect of non-contentious work, but to be enforceable this must be in the form of a non-contentious business agreement

Other Methods

  • A solicitor may agree to be remunerated by alternative means, e.g., shares in a company

Money on Account

  • Requiring money on account is standard, but in contentious business, a solicitor may need the client to pay a reasonable costs sum.
  • The solicitor can end the retainer if it isn't paid in a reasonable time, but there's no such legal right in non-contentious business

The Solicitor's Bill

  • Certain legal forms must be followed for a solicitor to obtain payment from the client. The bill must contain enough information for the client to be satisfied that the bill is reasonable, and also provide information of the period that the bill relates to
  • It must be signed by a solicitor or employee
  • Delivery by hand or post is required unless email is agreed

Interim Bills

  • A solicitor can bill the client before things are done, especially if things are going to go on for a while
  • Law Society recommends that this be expressly reserved
  • Interim bills come in 2 types:
    • Interim 'statute bills' follow all rules per the Solicitors Act 1974.
    • 'Bill on account' that are payment requests toward the final bill.

Interest on Bills

  • Solicitors may charge interest on an unpaid bill one month after being delivered
  • The rate of interest charged must be less than the rate of payable judgment debts, at 8%

Enforcement

  • Subject to certain exceptions, a solicitor may not commence a claim until a month has passed
  • The High Court has the power to allow the solicitor to commence a claim against their client within a month

Client Right to Challenge Bill

-Client may call into question the solicitor's bill.

  • Client must comply with specific requirements
  • There are certain options available to challenge the bill

Assessment by the Court

  • Clients may have the bill assessed, sometimes referred to as 'taxed'.
  • These assessments should be done within one month
  • If this is not done, the client may still apply to the court, but it may take a leave of court
Non-Contentious Proceedings
  • When assessing a solicitor's bill in a non-contentious proceeding, the court must consider:
    • The matter's complexity
    • Skill/knowledge used
    • Time spent
    • Number of documents prepared
    • Place of transaction
    • Value of any money
    • Any land involved
    • How important the issue is to the client
Contentious Proceedings
  • When considering whether a bill is reasonable for contentious proceedings, the court must take into account:
    • the conduct of parties
    • money involved
    • complexity
    • how important this is to anyone involves
    • effort, any knowledge and responsibility

Using the Firm's Complaints Procedure

  • Clients must be informed of their right to complain in writing
  • Inform the client the right to contact the Legal Ombudsman should the client not be satisfied with the firm's response

Non-Contentious Business Agreement

  • A solicitor and client may form a non-contentious business agreement
  • This must follow the Solicitors Act 1974

Contentious Business Agreements

  • Solicitors may enter into a controversial business agreement, however remuneration by a contingency is not an option
  • The agreement must state it is a contentious business agreement, be in writing, be signed by the client and contain all the terms.

Overcharging

  • Solicitors must act in the client's best interests
  • Solicitors must show integrity
  • Cost officers have to inform the SRA if they lower more than half the costs on a non-contentious matter

Commission

  • The solicitor client relationship is a fiduciary
  • Paragraph 4.1 obliges a solicitor to properly account to a client for any financial benefit the solicitor receives as a result of the client's instructions
  • Any commission, discount or rebate are considered a financial benefit

Summary Points

  • Service provided has to be satisfactory
  • Be responsible and address all concerns
  • Make sure to inform the client properly on charges
  • Don't use any form of misleading statements
  • Communication has to be clear
  • Distinctions are made in controversial and non-controversial matter

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