Estimating your legal costs – Why?

Not only is it prudent and good practice, but it is essential that clients are regularly provided with estimates of their potential legal costs and are appraised in that regard.

The SRA require lawyers to provide their clients with the best possible information regarding the cost of the matter. This should be provided at the outset and reviewed and updated as and when necessary. Estimates of costs up to a particular stage are inadequate to meet the SRA requirements, an estimate of costs up to the conclusion of the claim is required.

The SRA requires lawyers at the outset to analyse whether pursuing the claim is commercially viable. Does the outcome justify the risk of having to pay someone else’s fees? So, an explanation needs to be given to the client of the likely costs of the claim, to include both party’s costs and whether the claim is worth pursuing in view of that. This should be reviewed throughout the lifetime of the claim and updated if appropriate. The reasoning is that the client should be able to make a fully informed decision when deciding to pursue litigation, a partial estimate does not allow this.

This is good practice in any event as it ensures that your client’s expectations are managed and will lead to no surprises. This transparency can lead to less disputes regarding the level of fees and the avoidance of any complaints in law firms which centre around fees.

The type or complexity of the claim will really depend on how sophisticated the estimate will need to be, however scoping the work properly will alleviate any scope creep.

Moreover, preparing an estimate of how much you consider that the claim will cost will assist regarding your approach, a more informed decision can be made regarding this. Providing this information does show confidence in pricing and in any event this more sophisticated pricing is being seen in the marketplace.

In the event of scope creep, a detailed estimate can assist and justify those further costs that are associated with the additional work. It is wise to keep your client informed if any of the out of scope work is not recoverable from the otherside, failure to do so may put you at risk regarding those additional costs.

In addition to identifying out of scope work, it is sensible to monitor your estimate and advise the client if the estimate is subject to change. If a detailed estimate has been provided at the outset it will be much easier to explain why the estimate requires increasing.

The draconian sanctions and restrictions surrounding budgets do not apply to estimates, the estimates are used as a yardstick to measure reasonableness. It is not intended to be straight jacket, that said, they do need to be prepared with care because if the client can show reliance and the matter proceeds to solicitor and own client assessment then your costs are at risk of a reduction as a result of that reliance.

Sue Fox is a Senior Associate and the Head of Costs Management in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at sue.fox@clarionsolicitors.com and 0113 336 3389, or the Clarion Costs Team on 0113 246 0622

 

Getting paid properly – Costs Estimates

Costs Estimates

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?

Sort of!

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.

IN SUMMARY

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.

Sue Fox is a Senior Associate and the Head of Costs Management in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at sue.fox@clarionsolicitors.com and 0113 336 3389, or the Clarion Costs Team on 0113 246 0622.