What is misconduct?

ASW Link - Tuesday 19th May 2015

As the new Legal Ombudsman takes over complaint handling from the Legal Complaints Service, we explore what lessons can be learned about the enforcement of professional conduct rules and how this interacts with successful tendering

The impact of market forces on the legal profession is evident in the many stories about panel reviews, law firm rosters and competitive tenders appearing the legal press. In these times of austerity solicitors, like all other businesses, have to compete for work to survive.

Value for Money

Technical competence and a good standard of service are as important as price when selecting which lawyers to instruct.

In general the successful firms in tendering exercises were also amongst the lowest bidders on price.  This appears to be more than coincidence but it does not mean that cost was the only deciding factor.  It is sometimes not possible to distinguish between firms on expertise alone so pricing, or more accurately value for money, is used as a tie-breaker.

If you interpret value for money as meaning achieving the best outcome at the lowest cost, comparing hourly rates on their own without knowing how those rates are to be applied would not result in a fair evaluation. To measure value for money, the fee that lawyers charge should be linked in some way to the output of their work.

To develop ways to achieve this, it helps to have an understanding of the interplay of conduct rules and day-to-day practice in relation to fees and estimating.

Costs Estimates

Professional conduct rule 2.03, for example, requires solicitors to provide clients with the best information possible about the likely overall cost of a matter both at the outset and, when appropriate, as the matter progresses.  The guidance notes to this rule go on to state All costs information must be given in writing and regularly updated’.  In many practical situations, however, solicitors do not provide such estimates or fail to update estimates as transactions progress. This can result a surprise bill being presented for which no, or too low an estimate has been provided.

However, it would have been unwise to take comfort from Rule 2.03 believing it provides a robust deterrent. This is because under policy previously adopted by the Legal Complaints Service (LCS) and the Solicitors Regulation Authority (SRA), the rule was effectively unenforceable.

Poor service could not be in relation to a bill

Until recently the LCS investigated complaints about solicitors. They classified complaints as either about poor service or about a bill.  Because of the use of the word ‘or’ in this context those two alternatives were mutually exclusive.  In other words, poor service could not be in relation to a bill.

The only remedy for a complaint about a bill was to apply for a remuneration certificate, under which the client had to pay half the professional costs on the disputed bill, all the VAT and all disbursements, immediately and with no right of appeal.  Therefore a client presented with a bill that was more than twice the most recent estimate would have to pay more to the solicitor under the scheme than he would have had to have done if Rule 2.03 had been complied with.

Even if the amount in dispute were less than half the value of the bill, the protection that Rule 2.03 purported to offer would evaporate under the remuneration scheme. An individual caseworker would investigate what was ‘fair and reasonable’ without any reference to the code of conduct. In reality, therefore, the distinction between poor service and complaint about a bill meant that the LCS would not enforce the conduct rule.

The small print on the LCS website advised that ‘in a small number of cases we may also refer your case to the Solicitors’ Regulation Authority if we think the solicitor has broken any rules of professional conduct.  This is called misconduct.’

That appears to be an obvious statement, but the regulator interpreted the term differently.  The SRA website explained that if a solicitor breaks conduct rules, there may have been misconduct. Specifically, in relation to the requirement to provide fee estimate information, they regarded a complaint about a breach of Rule 2.03 as being beyond their remit to investigate.

So a breach of Rule 2.03 was not poor service, it was not enforced through the remuneration scheme and it was not treated as misconduct.  We do not yet know whether this loophole will be closed with the launch of the Legal Ombudsman to replace the LCS, or reconsideration of the issue by the SRA.

Fair and effective methodology

It is precisely this problem of enforcement that we believe has to be addressed in order to develop a fair and effective methodology for comparing law firms.  One approach is to promote voluntary guidelines or the solution could involve giving contractual effect to key principles.

On a practical level, clients can always put their lawyers to the test by scoping detailed instructions in advance, broken down to stages and identifying assumptions and asking firms to price against each stage, showing allocation of fee earner seniority and number of hours as well as hourly rates. The detailed fee estimate can then be treated as an agreed limit on costs going forward, creating budget certainty and complete transparency on both sides.

Turning best practice into effective enforcement without the need to resort to the regulator will give clients the protection they are entitled to expect and it will help restore trust in the ability and willingness of the profession to regulate itself properly.