Soft law

Just as many solicitors will proceed from qualification to retirement, without a single solicitor-own client assessment troubling them and in blissful ignorance of the travails of section 70 of the Solicitors Act 1974, so it remains the case that for many solicitors, the Legal Ombudsman remains a distant figure, paid tribute in client care documentation, but who like a legal Olympian, does not condescend to interfere in the affairs of mortals on a day to day basis. To whatever degree that may have been true in the past, I would suggest it is unlikely to be the case in the future. A more high profile intervenionist regime can reasonably be anticipated for three reasons.

The first is the exhortation by the Court of Appeal in the case of Belsner v Cam Legal Services Limited [2022] EWCA Civ 1387 that low value solicitor-own client costs disputes should be directed to the Legal Ombudsman, rather than to the High Court. This is likely to lead to an increase in complaints to the Legal Ombudsman, particularly where the fees in dispute are under £10,000. As noted in paragraph 15 of the judgment:

….Finally, it is also unsatisfactory that solicitors like can adopt a business model that allows them to bring expensive High Court litigation to assess modest solicitors’ bills in cases of this kind. The Legal Ombudsman scheme would be a cheaper and more effective method of querying solicitors’ bills in these circumstances, but the whole court process of assessment of solicitors’ bills in contentious and non-contentious business requires careful review and significant reform.

And in the linked case of Karatysz v SGI Legal LLP [2022] EWCA Civ 1388 the Court of Appeal went further:

45 The client allowed to bring this costly case on her behalf, when she had almost nothing to gain. As Lavender J demonstrated at para 42, she recovered £177.50 before District Judge
Bellamy, which was all that was really at issue except massive sums by way of costs. The process whereby small bills of costs are taxed in the High Court is to be discouraged. It is far more economic to use the Legal Ombudsman scheme which is a cheaper and more e›ective method of querying solicitors bills in these circumstances. Moreover, whilst it has not been necessary todecide whether there were special circumstances in this case under section 70(10), because the client has not succeeded on her appeal, there remains a lesson to be learned from this case. Firms such as checkmylegalfees. com and their clients should be in no doubt that the courts will have no hesitation in depriving them of their costs under section 70(10) if they continue to bring trivial claims for the assessment of small bills to the High Court, even if those bills are reduced on the facts of the specifoc case by more than one fifth under section 70(9). The critical issue is and always will bewhether it is proportionate to bring this kind of case to the High Court. In this case, it was not.

The second is the more proactive approach being taken by the Legal Ombudsman in relation to the guidance it provides to solicitors, about their charging practices. The Legal Ombudsman is refining the basis upon which it will find poor service, and in doing so, expanding the scope of conduct which will ground a successful complaint. This month saw the publication of An Ombudsman’s View of Good Costs Service which is well worth reading. Key extracts include advice on the topical issue of fixed recoverable costs:

In cases where costs are recoverable from another party, it is important that clients understand how costs recovery works, and whether their liability to their lawyers can exceed the recovered costs. Will this mean that they will have to meet any shortfall? This is particularly important in cases subject to fixed costs, where there might be a significant difference between the costs that are incurred on a time-spent basis and the fixed costs that are recoverable from another party. Clients should be told how fixed costs operate, because they need to appreciate that there is a risk of their costs exceeding the sums that can be recovered, and they need to understand what this means for them. One possible approach is capping your client’s liability to a certain proportion of damages, such as by saying, ‘You remain liable to pay any costs which we cannot recover from your opponent, but we will limit your liability to [x] per cent of the compensation you recover’. This can be an effective way of addressing the risk of shortfalls, so long as the capping arrangement is explained clearly at the outset. The complaints we see on this topic typically come from when a lawyer has charged (or indeed already taken) more than the client expected to pay. When you know how you intend to charge your client, and you should ensure your client understands this. If your understanding changes, you should ensure the client’s understanding changes with it. The same goes for anyone else’s costs. Good practice is to record that you have done so, too. The issue of shortfalls on costs recoveries also arises in connection with success fees in conditional fee agreement (CFA) cases, as success fees can no longer be recovered (except in mesothelioma cases). We address the issue of success fees separately below.

And in relation to the charging of success fees:

Where a lawyer intends to charge a success fee that is calculated based on risk, the reasoning behind this calculation should be provided to the client. If not, we might decide that the client is not getting the information they should about how their costs are generated. Where a lawyer intends to charge a success fee that is not based on risk, or which includes other elements alongside risk, this needs to be explained to the client clearly at the outset, and the overall costs charged must be seen to be reasonable. If we investigate a complaint where a firm has a policy of charging a substantial success fee in every case, regardless of risk, we are likely to ask the firm to show us that the client has given informed consent to the arrangement. This would include the client being made aware that other lawyers might not adopt the same approach and that lower success fees might be available elsewhere.

Finally the Legal Ombudsman’s formal and informal dispute resolution procedures have real bite and can expect to be utilised more heavily in the future, as the in terrorem prospect of an adverse costs order in section 70 assessments simply will not exist to deter aggrieved former clients. In the recent case of Olukoya v Riverbrooke Solicitors Ltd [2023] EWHC 2771 SCCO Costs Judge Leonard had to grapple with the following scenario:

1. On 26 January 2023, the Claimant filed an application under section 70 of the Solicitors Act 1974 for the assessment of a bill delivered by the Defendant solicitors to the Claimant on 28 December 2022. The Claimant applied for alternative remedies, but they are not material for present purposes.

2. On 8 March 2023 this court made an order for the assessment of that bill, referred to in the order (for reasons that I will explain) as “the Revised Bill”, and provided for four issues to be tried as preliminary issues on the assessment. They were:

1) Whether the Defendant is bound by contract by the “agreed outcome” of a Legal Ombudsman procedure dated 20th February 2020, so that nothing can be due to the Defendant from the Claimant under the Revised Bill;

2) Whether the Defendant is prevented from raising the Revised Bill by the Legal Ombudsman’s Scheme Rules or other statutory provision, so that nothing can be due to the Defendant from the Claimant under the Revised Bill;

3) Whether the Defendant is estopped from raising the Revised Bill, so that nothing can be due to the Defendant from the Claimant under the Revised Bill, and

4) Whether the Defendant requires the court’s permission to raise the Revised Bill and, if so, whether permission should be given. 3. The jurisdiction of the Legal Ombudsman Scheme is derived from the Legal Services Act 2007. The Legal Ombudsman is empowered to investigate complaints against solicitors and to provide remedies to clients for inadequate service. Remedies include the limitation of fees, compensation for financial loss or for distress and inconvenience, and the requirement of an apology.

4. The term “agreed outcome” has been used in the Claimant’s Part 8 Claim Form, in correspondence and in evidence. It is not in itself indicative of a binding agreement. It is another way of describing what is referred to in the Legal Ombudsman’s Scheme Rules as an “Informal Resolution”, arranged between the parties through the Legal Ombudsman in February 2018 and described in more detail below. In this judgment I shall use the term “Informal Resolution”.

He concluded at the end of his judgment:

97. The Informal Resolution brokered by the Legal Ombudsman in February 2020 is a contractually binding agreement which limited the Defendant’s claim against the Claimant for costs and disbursements to a total of £13,000, all of which has been paid in accordance with the terms of that Informal Resolution.

98. For that reason alone, the Defendant had no right to render a “Revised Final Invoice” almost three years later, in December 2022. The “Revised Final Invoice” stands to be assessed at nil.

99. As an entirely separate point, the bill delivered by the Defendant to the Claimant on about 21 February 2020 and headed “Final Invoice” was a final, statute bill. The Defendant needed, but did not have permission, to revise that bill as the Defendant purported to do in December 2022 and again in February 2023.

100. Nor would it be appropriate for permission to be given. That is not just because the necessary criteria, on established authority, have not been made out, but because it would allow the Defendant to escape the outcome of an informal resolution brokered by the Legal Ombudsman in accordance with the Ombudsman’s Scheme Rules. To give permission in those circumstances would be wholly contrary to public policy.

101. Again, for that reason alone, it would be appropriate to assess the “Revised Final Invoice” at nil.

The case is an interesting illustration both as to how the informal procedure can be used to effectively broker a binding compromise between solicitor and client, on commonlaw principles and also how a client was effectively able to use the informal procedure as a base, for the arguments to preclude her former solicitor from resurrecting claims for costs against her.


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