We live in a society where people make choices about what they will spend their money on, all day, every day. This includes the amounts they will pay for goods and services and most people will pay, without question, once they have decided!
For example, peoples choices include ranges, which may involve a clients level of wealth, but may include such things as what shoes do I “need“: Manolo Blanik or Jane Debster? Or what car do I “need“: Lamborghini Veneno Roadstar or a Mazda 6?
Do I choose to shop at Portmans, DJ’s, Myer, Cartier, Gucci, Dior or Amani? Do I bargain with the retailer and ask for a discount when I arrive at the cash register, stating I don’t have the funds to pay for the full price of the goods that I “need“? or do I check the prices on the label/showroom prior to purchase and accept those prices as the disclosed cost that the retailer requires to be paid for purchase of the goods? All money choices, hit the hip pocket of consumers to varying degrees, however, payment is made after the consumer has had a role in the decision making process, prior to payment.
How can costs be managed with clients for a win/win happy ending for all?
5-7 min read….
Firstly, let me say, I am not referring to overcharging, which clients have a right to complain about, rather I’m commenting on fair, reasonable and proportionate costs for services rendered, as disclosed.
We all know that people are conditioned to pay for goods and services they “need”, in many areas of life, yet we often see clients arc up at paying legal costs they “need“, for a variety of reasons, including genuine financial limitations and others not so genuine. How can solicitors manage clients expectations with respect to costs and take the pressure off themselves, giving the client the power to make the necessary choices as to what they can and will ‘pay for” in the provision of legal services?
Ethical Obligations Re: Advice
Rule 7 Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 states:
“A solicitor must provide clear and timely advice to assist a client to understand relevant legal issues and to make informed choices about action to be taken during the course of a matter, consistent with the terms of the engagement.
A solicitor must inform the client or the instructing solicitor about the alternatives to fully contested adjudication of the case which are reasonably available to the client, unless the solicitor believes on reasonable grounds that the client already has such an understanding of those alternatives as to permit the client to make decisions about the client’s best interests in relation to the matter.”
A solicitor has an ethical obligation to engage in frank and comprehensive discussions with the client, at the outset and throughout the course of the matter about legal issues and costs (solicitor and barrister), so the client can “make informed choices” and can “make decisions about …their… best interests in relation to the matter”. It is the client’s choice about what action to be taken, once legal issues and costs associated with each course of action has been explained and understood by the client. Once the client has made the choice, it is their responsibility to pay the costs of the action (solicitor and barrister), as frankly discussed with them prior to commencement of any “course”.
Comprehensive, detailed notes should accompany each discussion on costs and legal issues. If a client is “needy or demanding” and increases costs by constant emails, telephone calls etc, this needs to be communicated with the client to again allow the client to make a choice as to how they wish to handle their legal situation more economically.
Ethical Obligations Re: Disclosure of Solicitor Costs
Section 174 Legal Profession Uniform Law 2014 provides the information for solicitors re: disclosure.The solicitor (a) must, when or as soon as practicable after instructions are initially given in a matter, provide the client with information
(1) disclosing the basis on which legal costs will be calculated in the matter and
(2) estimate of the TOTAL legal costs (excluding GST and disbursements) – (difficult to estimate however, best endeavour are required); and
(b) must, when or as soon as practicable after there is any significant change to anything previously disclosed under this subsection, provide the client with information disclosing the change, including information about any significant change to the legal costs that will be payable by the client— together with the information referred to in subsection (2).”
s 174(2) – clients “rights“must be disclosed. That essentially means that a client can negotiate the cost agreement and the billing method (time, transaction or task). The client can request a bill and/or request an itemised bill and if there is a dispute they can seek assistance from a designated regulatory authority.
s 174(3) If a disclosure is made under subsection 174 (1), the law practice must take all reasonable steps to satisfy itself that the client has understood and given consent to the proposed course of action for the conduct of the matter and the proposed costs.[Reasonable Steps Fact Sheet on Law Society website)
Solicitor’s Disclosure of Barristers Fees
s 175 provides solicitors obligations in respect to disclosure of barristers fees:
(1) If a law practice (the “first law practice” i.e. solicitor ) intends to retain another law practice (the”second law practice” i.e. Barrister ) on behalf of a client, the first law practice must disclose to the client the details specified in section 174(1) in relation to the second law practice (i.e. Barrister), in addition to any information required to be disclosed to the client under section 174.
The Barristers fees must be disclosed to the client at the outset and during the course of the matter as per s 174 (general disclosure provisions) to enable the client to make informed choices and decisions in respect to a barristers engagement. When the barristers cost agreement and disclosure is provided to the solicitor at the commencement of engagement (and then updated throughout the course of the matter) and work is subsequently completed by the barrister, the solicitor is under a professional and personal obligation to pay barristers fees, as disclosed by the barrister, as per the terms of the disclosed cost agreement (i.e. 14 day contract terms).
Communication between a solicitor and client is imperative to alleviate any possible misunderstandings re: obligations to pay solicitor and counsel fees, with good practice to communicate any issues about barristers costs with the barrister, once the fee disclosure and cost agreement has been provided, prior to the commencement of any work by the barrister rather than after work is completed and then raising the subject.
- Comprehensive communication about costs/fees (solicitor and barrister) with the client at the outset and then keep them fully informed of any variation to costs estimates and explain the reasons why. This will reduce the potential for complaints about fees and non payment of fees, as clients will feel they are in the “drivers seat” when it comes to knowing what course is being taken and the costs associated with that particular course, as barrister and solicitor costs will have been disclosed for the clients course of choice, with the client’s informed consent to both mandatory.
- Make sure clients fully understand the solicitor and barrister fee arrangements prior to any work being commenced or continued. If you are reticent to talk about fees with your clients, clients will be reticent to pay. Remember, people are used to paying for goods and services they “need” in all areas of life. Don’t be the reason they don’t pay fees or balk at paying due to you feeling awkward about “fee discussions”. All businesses disclose fees/costs, why should law be any different in being upfront about costs and expecting payment?
- Obtain the client’s informed consent before you incur large expenses such as briefing counsel.
- Adequately detail your bill so the client can understand why the bill is in the amount charged
- Offer alternatives that may be more in line with client financial limitations to settle their matter.
- Ask the client, and make it a prerequisite for clients to put money in trust, to cover “stages” or up to or including “events” so that fees can be paid, as agreed, otherwise, there is no bargaining power once the services have been rendered to then try and recover fees, after the event. Best to nip any cost/payment issues in the bud, by communicating and setting clear boundaries with the client about payment of fees, early in the engagement, and following with updates as the matter progresses.
When the above steps are implemented, which are essentially ethical obligations and good business acumen, the “pressure points” on solicitors regarding costs will be reduced as the client will be fully informed and will provide informed consent and instructions, with the costs (solicitor and barrister) associated with each course fully disclosed and agreed to. The client will be involved in the decision making process and it will be much more likely for clients to pay fees as expectations will be clearly specified and on the table, with everything being communicated and ‘visible” and as a result people will feel much less ambushed and will be more likely to pay fees as per the invoice. They have read the label before proceeding to the cash register, they have been involved in the decision making process to purchase or pursue a course with X costs!
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