Why provide an estimate of costs to your client in respect to their legal claim?
It keeps your client informed and therefore there are no surprises, this in turn manages your client’s expectation. This helps to avoid any dispute regarding the level of fees.
However, there is also the techy but important part!
Failure to provide information about costs and funding options for litigation is a breach of the Solicitors Regulation Authority Code of Conduct 2011 (SRA Code 2011), your obligations are to “clearly explain your fees and if and when they are likely to change”.
Consequently, keep your estimate up to date, monitor the estimate and advise the client if the estimate requires changing – prospective thinking is the key.
The estimate must be clear and concise, must be worded in a way that is appropriate for the client and must be given in writing and regularly updated. The client should be provided with a detailed estimate, not just a ball park figure.
A solicitor is required to undertake a cost benefit analysis. The Code’s requirement in Rule 2.03 (6) is that “a solicitor discusses with their client whether the likely outcome in a matter will justify the expense or risk involved, including, if relevant, the risk of having to bear an opponent’s costs”.
It is essential that the cost-benefit analysis must be kept under review throughout the matter and reviewed with the client at key stages.
What is the impact of not providing an estimate?
Your client may argue that they would have given different instructions/or not proceeded with the matter if they had known: how expensive the claim would be, the length of time it would take, the level of their legal costs that would be recoverable from the other side and also their liability for the other side’s costs.
What if the client asks you to undertake out of scope work?
Explain that the estimate does not cover the additional work and provide a further estimate of the additional work. Advise the client if there is any risk that this work may not be deemed recoverable from the other-side. Failure to do so may result in those additional costs being disallowed.
Is a solicitor bound by their estimate?
If the client requests an assessment of their costs in accordance with the Solicitors Act, the estimate may be used as a “yardstick to measure reasonableness”. Any estimates that have been exceeded because they are simply wrong will be taken into account, together with the circumstances surrounding it, i.e. the reliance the client placed on the estimate and costs reduced accordingly.
Always provide a realistic estimate
Keep your estimate realistic at the outset. Even regular updating might not subsequently save a bad original estimate. The court’s view is that the first estimate is a critical piece of information for a client’s decision whether or not to embark on the action.
The Code’s requirements are for “best” information to be provided about costs. Therefore providing low estimates are unlikely to comply with the SRA Code of Conduct.
- Always provide a detailed estimate of costs.
- Prepare a realistic estimate of costs.
- Monitor the estimate and revisit with client throughout – costs/benefit analysis.
- Identify and advise regarding out of scope work.