Managing Client Relationships: The 3 Cs

Question 1

What are the 3 Cs?

Answer 1

Customer due diligence
Conflict check
Client care letter

Question 2

What is customer due diligence?

Answer 2

Identifying your client and verifying their identity on the basis of documents, data or information from a reliable source.

Question 3

When must customer due diligence be carried out?

Answer 3

-establishing a business relationship; or
-carrying out an occasional transaction; or
-suspect money laundering or terrorist financing

Question 4

What are the three key reasons why you might not be able to accept instructions from a client?

Answer 4

-Breaching the law or Codes eg client asks you to commit a fraud
-You cannot provide a competent or timely service in line with CCS 3.2
-When you are not authorised to act on your client’s behalf in line with CCS 3.1

Question 5

If you have reason to believe that the instructions do not represent the wishes of your client, what should you do?

Answer 5

You cannot act for the client.

Question 6

What is an own interest conflict under CCS/CCF 6.1?

Answer 6

Any situation where your duty to act in the best interests of any client in relation to a matter conflicts, or is there is a significant risk that it may conflict, with your own interests in relation to that or a related matter.

Question 7

Is a significant risk of a conflict sufficient?

Answer 7

Yes, this will still give rise to an own interest conflict however this type of conflict is rare in practice.

Question 8

Provide examples of circumstances that may give rise to an own interest conflict.

Answer 8

-A financial interest of yours or someone close to you eg asked to carry out CDD on a company you/your spouse own shares in

-A personal or business relationship of yours eg asked to advise on a claim against a relative

-Your role as an employee eg asked to give advice in relation to a dispute involving your employer or a fellow employee

Question 9

What is a conflict of interest under CCS/CCF 6.2 and provide an example?

Answer 9

A situation where your separate duties to act in the best interests of two or more clients in the same or related matter conflict. For example, where there is a dispute between two clients.

Question 10

What are the two exceptions that allow you to act despite there being a conflict of interest?

Answer 10

-Substantially common interest (SCI)
-Competing for the same objective (CSO)

Question 11

Describe the SCI exception and provide an example.

Answer 11

A situation where there is a clear common purpose between the clients and a strong consensus on how it is to be achieved.

An example would be two people buying a house to live in together or two clients instructing you on setting up a business together, provided the key terms are agreed.

Question 12

Describe the CSO exception and provide an example.

Answer 12

A situation where two or more clients are competing for an objective which, if attained by one client, will make that objective unattainable to the other client or clients.

An example would be where two clients are competing to buy a business at an auction or through a tender process. This exception only applies to sophisticated clients.

Question 13

What conditions under CCS/CCF 6.2(i)-(iii) must be complied with for the conflict of interest exceptions to apply?

Answer 13

(i) all the clients have given informed consent, given or evidenced in writing, to you acting;

(ii) where appropriate, you put in place effective safeguards to protect your clients’ confidential information; and

(iii) you are satisfied it is reasonable for you to act for all the clients.

Question 14

When should a conflict check be carried out?

Answer 14

Before accepting instructions on a new matter from both new and existing clients.

Question 15

Who should a conflict check be carried out against?

Answer 15

A search should be carried out against:
-the client name and any of its parent or subsidiary companies
-the client’s company number and that of its parent or subsidiary companies
-the names of any counter parties to the matter
-the names of the directors of the client and any counter parties

Question 16

Is there an SRA requirement for firms to send out client care letters?

Answer 16

No, but it is best practice to do so as it demonstrates that the firm have met the SRA’s requirements regarding competence and level of service under CCS 3.3.

Question 17

What are good reasons for terminating a retainer with a client?

Answer 17

-Not being able to obtain clear instructions from the client
-When to carry on acting would break the law or breach CCS/CCF
-in certain circumstances where your client has failed to pay its bills

Question 18

What are the key contents of a client care letter?

Answer 18

-Confirmation of your client’s instructions and options
-General information on each party’s responsibilities
-Costs information
-Explanation of who will be dealing with the matter
-Complaints procedure

Question 19

What is private funding?

Answer 19

When a client funds legal work through their own private resources, which is normal for residential conveyancing or preparing a will.

Question 20

What is professional funding?

Answer 20

When legal work is funded through a trade union or professional organisation. It is most likely to occur in relation to civil or criminal litigation.

Question 21

What is BTE insurance?

Answer 21

Before the event insurance. This is taken out before the need for legal work arises and the policy pays out to cover the legal work in the event that it is needed.

It is often sold in conjunction with other insurance policies eg motor insurance.

Question 22

Are BTE insurance premiums recoverable from an opponent?

Answer 22

No, the premium is generally not recoverable from the other side.

Question 23

What is Community Legal Service (CLS) funding?

Answer 23

It is the provision of public funds to assist in the procurement of legal services for those who could not otherwise afford it. Formerly known as Legal Aid.

Question 24

Who is eligible for civil CLS funding?

Answer 24

Generally only available to individuals and most eligible types of claims relate to children/family disputes, homelessness or domestic violence. The vast majority of civil legal work is not eligible.

Question 25

What type of tests must be met to obtain civil CLS funding?

Answer 25

Means test-if the client’s income/capital is too high, they will be ineligible

Merits test-if the client’s position is insufficiently meritorious, they will not receive funding

Question 26

What is a conditional fee arrangement (CFA)?

Answer 26

It is a type of ‘no win no fee’ arrangement. If the case is successful, the solicitor will be paid their normal fee plus a success fee (uplift) of up to 100% on top of the normal fee.

It only applies to the solicitor’s costs and not other fees or disbursements.

Question 27

Will the court allow a party to recover a success fee under a CFA from an opponent?

Answer 27

No, therefore the success fee for a successful party effectively comes out of their damages.

Question 28

What is the cap on success fees in personal injury cases?

Answer 28

The success fee must not exceed 25% of the PSLA award and damages for pecuniary loss.

Question 29

What is a damages based agreement (DBA)?

Answer 29

This is another type of ‘no win no fee’ arrangement. If the case is successful, the solicitor will be paid a proportion of the damages awarded to their client by way of a remedy.

They also do not cover disbursements or opponent’s costs.

Question 30

What is the maximum amount a lawyer can recover under a DBA?

Answer 30

-25% (excluding damages for future care and loss) in personal injury cases
-35% in employment tribunal cases
-50% in all other cases

Question 31

What is ATE insurance?

Answer 31

A policy taken out in order to help the client cover the costs of litigation once a dispute has already arisen. It usually covers the client’s own disbursements and their own opponent’s costs and disbursements in the event of losing the case.

Question 32

Are ATE insurance premiums recoverable from an opponent?

Answer 32

No, with the exception of clinical negligence expert reports.

Question 33

What is third party funding?

Answer 33

This occurs when independent litigation funding is provided by a third party to enable parties to bring their cases to court. If the claim succeeds, the funder receives their money back plus an uplift.

Question 34

Outline the 3 key features of the code of conduct for third party funding.

Answer 34

-Promotional literature must be clear and not misleading
-Funders must not try to take control or conduct of the litigation away from the lawyers involved
-Funders must make sure they have sufficient funds in place to meet funding commitments

Question 35

What are the 3 main ways you can charge a client?

Answer 35

-Hourly charging
-Fixed fees
-Unbundled legal services

Question 36

What tests must a defendant pass to obtain a representation order in criminal proceedings?

Answer 36

Means and merits test.

Question 37

What type of defendants are ‘passported’ meaning they automatically pass the means test?

Answer 37

-Defendants under 18 years of age; and/or
-those on specified welfare benefits such as UC or jobseekers allowance

Question 38

Outline the means test in the magistrates court.

Answer 38

An initial assessment works out the applicants weighted gross annual income (combined with a partner unless they are a complainant, witness or Co-Def). The applicant will be:

-Eligible if they are at or below the lower threshold of £12,475

-Ineligible if they are at or above the upper threshold of £22,325

-Required to undertake a full means test if in between the thresholds. If their annual household disposable income is £3,398 or below, they will be funded

Question 39

Outline the means test in the Crown Court.

Answer 39

The applicant is assessed on their income and capital, including any equity. After a combined allowance of £30,000, applicants can be required to contribute any balance towards their defence costs.

In relation to the applicant’s annual household disposable income, the applicant will be:

-Ineligible if above the eligibility threshold of £37,500 or more

-Eligible if below the threshold of £3,398 or less

-Eligible with a contribution if in between the thresholds

Question 40

What form must a defendant complete to pass the merits test?

Answer 40

CRM14 form in order to demonstrate that it is in the interests of justice for them to be legally represented.

Question 41

Which defendants will automatically pass the interests of justice?

Answer 41

Those charged with:
-an indictable only offence; or
-an either-way offence is later sent to the Crown Court

Question 42

What are the 10 Propositions that come under the merits test?

Answer 42

1. I will lose my liberty
2. I have been given a sentence that is suspended or non-custodial. If I break this, the court may be able to deal with me for the original offence
3. It is likely I will lose my livelihood
4. It is likely I will suffer serious damage to my reputation
5. A substantial question of law may be involved
6. I may not be able to understand the court proceedings or present my own case
7. Witnesses may need to be traced or interviewed on my behalf
8. The proceedings may involve expert cross examination of a prosecution witness
9. It is in the interests of another person I am represented (the fact the defendant has a family does not suffice-it has to be someone involved in the court proceedings)
10. Any other reasons

Question 43

If a defendant fails the means test, can they appeal?

Answer 43

There is no right of appeal but they can submit another form if their circumstances have changed.

Question 44

If a defendant fails the merits test in the magistrates court, can they appeal?

Answer 44

They can submit another application and if unsuccessful, appeal to the magistrates court.