The advent of the information age has paved the way for rapid communication and networking which has re-shaped the world we live in today. Social and technological changes are forcing all enterprises, whether private or public, to become more transparent. This transparency is an important component of building trust in the relationship between an entity and the people it serves.
Whilst it may have been perceived in the past by some legal practitioners that generous outflow of information to clients would only result in the client using the information to the lawyer’s detriment, such thinking has changed as most legal practitioners have embraced the need for greater transparency by abandoning the notion that they enjoy haloed immunity from public demand for an open agenda. As a matter of fact, most lawyers today would as a matter of course, provide explanations to prospective clients on the work to be done for the matter, how the client will be charged for the legal work and the nature of billing to expect during the course of the matter. Indeed, it will not serve the lawyer or the client if information silos, especially on legal costs, are allowed to simmer as an opaque legacy within the profession.
In the area of legal fees in particular, any faltering in the standards of disclosure required on how legal fees are charged would indicate a lack of integrity that is likely to diminish the trust placed in the lawyer and in the profession by the public.
The Legal Profession (Professional Conduct) Rules (“PCR”) stipulate various Rules that underpin important disclosure obligations, positive compliance duties as well as prohibitions on cost and money related matters when accepting a brief from a client. Significantly, r 2 which sets out the four underlying principles of the PCR lists out the lawyer’s duty to act in the best interests of his client and charge fairly for work done as one of the four cardinal duties of a lawyer.
As a reminder to members, this article highlights extracts of the relevant Rules in the PCR on costs related matters (the “Rules”):
Disclosure Obligations Under the Rules
Rule 18: requires that disclosure is made when monies are received on the client’s behalf.
Rule 35: requires that disclosure is made on the basis of which fees are charged, the manner in which the client can expect the fees and disbursements to be payable; foreseeable payments that may be required to be made by the client to third parties and when it is likely to be payable; estimates of the likely fees which should not vary from the final amount charged unless the client is informed in writing of the changed circumstances; that fees may be capped to a limit and the client is to be informed where the limit is insufficient and instructions obtained on whether to continue with the matter and to disclose the approximate amount of costs incurred every six months or deliver an interim bill in appropriate cases.
Rule 36: requires that in contentious cases, disclosure is made at the outset of the matter and at appropriate stages thereafter that the client shall be responsible for paying his own lawyer’s fees in full regardless of any orders for costs made against the opponent; that if the client loses, he will have to pay his opponent’s costs as well as his own lawyer’s costs; even if he wins, his opponent may not be ordered to pay the full amount of the costs that he has to pay his own lawyer; and the opponent may not be capable of paying the costs or other payments that have been ordered against him.
Rule 40: requires disclosure and evaluation of whether the consequences of a matter justify the expense or the risk involved.
Compliance Obligations Under the Rules
Rule 13: requires that work is done without unnecessarily or improperly escalating costs payable.
Rule 19: requires that statements of account, if required by the client, are provided expeditiously.
Prohibitions Under the Rules
Rule 37: prohibits negotiations on contingency fee arrangements or arrangements where fees are proportionate to the amount to be recovered by the client.
Rule 38: prohibits rendering of a bill which amounts to gross overcharging that will affect the integrity of the profession.
Complaints Due to Fee Related Issues
It appears that in a bid to attend to the substance of the retainer, lawyers sometimes seem to fall short in giving sufficient attention to the Rules and end up facing complaints related to costs issues. In fact, of the total number of complaints filed for Inadequate Professional Services over the last three years, half of them related to or stemmed from cost related issues.
If properly complied with, the Rules do actually provide a substantive checklist of “do’s and don’ts” in relation to cost disclosures and cost matters which set a high standard of client protection and give little room for such complaints being successfully proven.
It is axiomatic from these complaints that clients often claim to be ignorant about the progress of their case and invariably feel burdened when they receive a bill for legal fees and disbursements which they claim was not presided by any explanation on how the costs were computed. The problem is compounded where the bill is received after a year or more and where the outcome of the case does not exactly commensurate with client expectations.
Gross Overcharging
While recent cases of gross overcharging have been minimal, as clients typically seek lawyers for access to justice, even one or two such complaints would be one too many and sufficient to leave an indelible blemish on the profession at large.
In Law Society of Singapore v Andre Ravindran Saravanapavan Arul [2011] SGHC 224, the High Court ruled that incidents of overcharging would minimally lead to the imposition of a heavy fine and an adverse costs order while repeat offenders or cases bordering on cheating or taking unfair advantage of an ignorant client could lead to more serious sanctions resulting in suspension or striking off. Extra care should, therefore, be taken when dealing with less sophisticated clients with limited education or literacy levels on matters of legal costs to ensure that no unfair advantage is taken and the client’s interests are not compromised.
In the same case, the High Court was also critical of the fact that the respondent lawyer had not advised taxation as a way to resolve the matter when his client, a Management Corporation, had expressed concern over the bills. If taxation had been advised and pursued, the complaint and resultant disciplinary proceedings may have been avoided.
In a call to the profession to be upfront and forthcoming with advice to clients on the option of taxation to resolve costs disputes, The Honourable The Chief Justice Chan Sek Keong cautioned at para 42 of the judgment, “Let this be a morality tale for the edification of all like-minded solicitors in similar situations”.
Members are therefore reminded to advise clients of the option of taxation which should ideally be a precursor to any complaint of gross overcharging.
Communication Lapse
A majority of cost dispute complaints are caused by a lapse at the onset of the matter on proper communication and explanations resulting in misplaced expectations. The problem is often compounded by a perceived lack of diligence on the part of the lawyer due to time lag in arriving at a final outcome to the matter. In such cases, receipt of the bill which was not presided by any clear explanation or was at variance with the preliminary legal fee estimate, is often the final straw and forms the catalyst that precipitates a complaint.
In appropriate cases, where a complaint of Inadequate Professional Service is made in relation to a fee dispute, the Law Society’s appointed Investigative Tribunal may order that a refund not exceeding S$10,000 be paid by the lawyer to the client.
Many such matters need not have ended up as complaints if there was sufficient dialogue, communication and disclosures on costs before the retainer was accepted.
Members are urged to take time to ensure clear and complete information on costs and estimated disbursements are given to clients at the onset of the retainer and that such information is properly documented and explained.
Steps to Take
Engagement Letters
As a starting point, it is important to make use of comprehensive Letters of Engagement setting out the basis on which legal fees will be charged, billing methods, costs explanations on solicitor and client costs and party and party costs as well as the implications of winning and losing a matter in the case of contentious suits and the options of who to contact or what to do when there are concerns on fees. Time should be taken to explain the purport of these Letters of Engagement at the onset of the retainer.
Compliance Protocol
As a corollary to the Letter of Engagement, it would be beneficial to entrench the requirements under the Rules on costs matters as part of the compliance protocol within the law practice for all client matters. All relevant staff and members of the law practice should be fully acquainted with the protocol.
The following is a suggested checklist of cost disclosures to be incorporated into the protocol:
1.The basis on which the costs will be calculated;
2.The client’s right to negotiate a costs agreement with the practitioner;
3.The client’s right to receive a bill from the practitioner;
4.The client’s right to request an itemised statement of account;
5.The client’s right to be notified of any substantial change to the matters disclosed;
6.An estimate of the total legal costs or a range of estimates with an explanation of the major variables that may affect the calculation of the costs;
7.Details of how frequently the client will be billed;
8.The client’s right to receive a progress report;
9.Details of the person the client may contact to discuss their costs;
10.Details of what the client may do in the event of a dispute, including their right to have costs assessed or taxed, their right to set aside a costs agreement and their right to mediate their costs dispute, along with any time limits in relation to the above;
11.Details of other expenses that are likely to arise in the legal proceedings including fees for medical and other experts’ reports, fees for filing documents in Court, witnesses’ expenses, disbursements; and
12.It should be pointed out that it is often difficult to predict the final cost of legal services because most cases involve some unknown factors. However, the client should be advised to ask the practitioner to estimate how long the matter is likely to take and what kinds of expenses will be involved.
If the matter involves litigation, the following additional disclosure obligations should be included in the protocol:
1.An estimate of the range of costs that may be recovered from the other side if the client is successful;
2.An estimate of the range of costs that the client may be ordered to pay to the other side if the client is unsuccessful;
3.If settlement of a litigious matter is negotiated, the practitioner should also disclose the details of the settlement and costs payable to the client before settlement is executed;
4.An estimate of the costs payable by the client; and
5.An estimate of any contribution towards those costs likely to be received from the other side.
In family law matters, if an offer of settlement is made during an ancillary or interim matter, the client should be informed about actual costs to date and estimated costs to complete the case.
The protocol should require that practitioners disclose their costs as outlined above before commencing any work for the client. In matters where this is not possible, such as an urgent criminal matter or an urgent letter as a first step in a longer process, the practitioner should disclose their costs as soon as practicable after doing that work.
As it is not unusual for unforeseen costs to arise as the matter progresses, the protocol should highlight that the practitioner must notify the client in writing of any substantial change to the original estimate provided. Interim Bills
Rendering interim bills regularly so that clients appreciate the work done and also that the work entails costs is a good way to take the pinch away from having to settle payment in one lump sum and paves the way for a better understanding of what the client is paying for.
Concluding Remarks
In the event of a dispute on costs, keeping communication channels open to resolve the matter would go a long way in ameliorating the problem. The Law Society provides an amicable and economical way to resolve such disputes through a mediation process. Please visit our website at http://www.lawsociety.org.sg/public/you and your lawyer/cost dispute.aspfor more information on this service.
We trust members will give more attention to the adequacy of their explanations to potential clients on matters relating to legal costs and expenses. Clients should not be left clueless about what they will be required to spend on a case.
► Ambika Rajendram
Director
Conduct Department
The Law Society of Singapore
E-mail: [email protected]