Costs

Question 1

what information must a solicitor give the client about costs?

Answer 1

• A solicitor is obliged to provide a client with the best possible information about costs at the time of engagement and as the matter progresses about the likely overall cost and any incurred costs
• A solicitor should try to provide a precise figure, but if they cannot they will need to explain why and either:
  o Agree a ceiling figure; or
  o Agree a review date when costs will revisit costs position
  o It is not sufficient for a solicitor to provide their charge-out rate only

Question 2

if the solicitor cannot give a precise figure about costs, what must they do?

Answer 2

A solicitor should try to provide a precise figure, but if they cannot they will need to explain why and either:
o Agree a ceiling figure; or
o Agree a review date when costs will revisit costs position
o It is not sufficient for a solicitor to provide their charge-out rate only

Question 3

what happens if the solicitor fails to say ‘plus vat’?

Answer 3

• The solicitor must say ‘plus VAT’ otherwise the client isn’t liable to pay VAT

Question 4

what information must the solicitor be told regarding costs in litigation?

Answer 4

• The client must be informed that they may be ordered to pay the winning party’s costs if they lose
• If the client wins but there is a shortfall between the costs awarded and their solicitor’s costs, they can only be made to pay the shortfall where they have signed a written agreement to this effect
• If the other party can’t pay the costs order, the client will be liable to pay

Question 5

what happens if there is a shortfall between a costs award and the solicitor’s costs?

Answer 5

If the client wins but there is a shortfall between the costs awarded and their solicitor’s costs, they can only be made to pay the shortfall where they have signed a written agreement to this effect

Question 6

re: solicitor’s bill

what is a statute bill?

Answer 6

a bill that complies with legal requirements. Two types:

1. Interim statute bills  a final bill for the firm’s charges for the period to which it relates
    There can be no adjustments at a later date
    Issued in accordance with the retainer or at a natural break (i.e. in protracted litigation)
2. Final statute bills  issued at the end of the case

Question 7

re: solicitor’s bill

what is an interim statute bill?

Answer 7

Interim statute bills > a final bill for the firm’s charges for the period to which it relates
 There can be no adjustments at a later date
 Issued in accordance with the retainer or at a natural break (i.e. in protracted litigation)

Question 8

re: solicitor’s bill

what is a final statute bill?

Answer 8

o Final statute bills > issued at the end of the case

Question 9

re: solicitor’s bill

what are the requirements for a statute bill?

Answer 9

o The bill or covering letter must be signed by the solicitor or an employee authorised to sign it

o The bill must be delivered to the client either:
 Personally
 Post or leaving it at their place of business, dwelling house or last known address
 Electronically or other means if the client has agreed to the specific form used

o The bill must be reasonably complete and have sufficient narrative

o It should set out the period to which it relates

Question 10

re: solicitor’s bill

how can a statute bill be delivered to a client?

Answer 10

 Personally
 Post or leaving it at their place of business, dwelling house or last known address
 Electronically or other means if the client has agreed to the specific form used

Question 11

re: solicitor’s bill

what is the effect of a statute bill?

Answer 11

o A solicitor can sue a client for non-payment
o A client can apply to have a statute bill assessed by the court

Question 12

re: solicitor’s bill

what is an interim bill on account?

Answer 12

• This a request for payment where part of the work has been completed

Question 13

re: solicitor’s bill

what formalities must an interim bill on account meet?

Answer 13

• This does not need to comply with the above requirements

Question 14

re: solicitor’s bill

what type of interim bill is more common? Why?

Answer 14

an interim bill on account is more common than an interim statute bill, because this can be adjusted some firms prefer this as they are more flexible

Question 15

re: solicitor’s bill

what is the drawback of an interim bill on account?

Answer 15

• Solicitor is not entitled to sue for non-payment
• The client cannot have the bill assessed by the court

Question 16

re: solicitor’s bill

if a client doesn’t pay an interim bill on account, what can they do?

Answer 16

Solicitor is not entitled to sue for non-payment.However, if the client doesn’t pay the bill on account in a contentious matter in a reasonable time they can terminate the retainer

Question 17

re: solicitor’s bill

if the client thinks an interim bill on account is too high, what can they do?

Answer 17

• The client cannot have the bill assessed by the court. If they think it is excessive, they should ask for a statute bill to be issued

Question 18

re: solicitor’s bill

can interest be charged on bills?

Answer 18

• Non-contentious matter > can charge interest that does not exceed the amount payable on judgment debts (currently 8%) on the whole or outstanding part of a bill one month after delivery. The client must have been given notice of their right to challenge the bill
• Contentious matter > can charge interest if expressly provided in the retainer or if the client agrees to it at a later date

In either case, if the solicitor sues for non-payment the court can award interest on the debt

Question 19

re: solicitor’s bill

what is the position in charging interest on bills for non-contentious matters?

Answer 19

• can charge interest that does not exceed the amount payable on judgment debts (currently 8%) on the whole or outstanding part of a bill one month after delivery
  o The client must have been given notice of their right to challenge the bill

Question 20

re: solicitor’s bill

what is the position in charging interest on bills for contentious matters?

Answer 20

can charge interest if expressly provided in the retainer or if the client agrees to it at a later date

Question 21

re: solicitor’s bill

when can a solicitor make a claim for costs?

Answer 21

• A solicitor cannot issue a debt recovery claim until one month after the bill was delivered
• The bill must be in proper form
• The High Court allows a solicitor to bring a claim within one month if the court is satisfied the client is going to leave the country, be declared bankrupt or do anything that would delay the solicitor obtaining fees

Question 22

re: solicitor’s bill

what routes can a client take to challenge a bill?

Answer 22

o Assessment by the Court
o Internal complaints procedure / LO

Question 23

re: assessment by the court

what is the assessment by the court called?

Answer 23

• Also referred to as the bill being ‘taxed’

Question 24

re: assessment by the court

when must the client apply to the court?

Answer 24

they must apply within 1 month of receiving the bill.

Between 1 month to 12 months after delivery, the client will need leave from the court

Question 25

re: assessment by the court

who will assess costs and how?

Answer 25

• Costs will be assessed by a costs officer (i.e. a Judge or DJ) on (usually) an indemnity basis.

Question 26

re: assessment by the court

what may the court order?

Answer 26

• The client may be ordered to pay the solicitor’s costs for the assessment

Question 27

re: assessment by the court

what effect does the court’s determination have?

Answer 27

it is binding

Question 28

re: assessment by the court

what will the costs officer consider when deciding reasonableness?

Answer 28

• When deciding reasonableness, the costs officer will consider:
  o Complexity of the matter
  o Skill, labour, knowledge and responsibility involved
  o Time spent
  o Value of the money / property involved
  o If any land is registered
  o Importance of matter to client
  o The place where the work was undertaken
  o The express/implied approval of the costs and/or the work giving rise to the costs (non-contentious only)
  o Number and importance of documents prepared/considered (non-contentious only)
  o Conduct of parties (contentious only)

Question 29

re: assessment by the court

when can the client not apply for assessment of costs?

Answer 29

• Subject to certain exceptions, a client cannot apply for assessment of costs where they have entered into a contentious business agreement

Question 30

re: assessment by the court

what must the court do if the bill is significantly reduced?

Answer 30

• If a costs officer reduces costs by more than 50%, they must inform the SRA
  o Overcharging is a breach of P5 & P7

Question 31

explain the ‘internal complaints procedure / legal ombudsman’ route

Answer 31

• Is not satisfactorily resolved following using the firm’s complaints procedure, they can complain to the LO
• The LO can then make a determination that the solicitor refund or remit fees
  o If this is accepted by the client, it will be binding on the solicitor