For over two decades now, I have been campaigning against the defective billing practices used by law firms in England & Wales. The world renowned legal directory, Legal 500, published my first article on this subject in 1998, “Defective Billing Practices” this gave graphic illustrations of defective billing practices used at that time and which continue to be used today. The law and regulations mentioned in that article cover a period 150 years.
The Competitions and Marketing Authority (“CMA”) after a year long investigation, published a report on 15th December 2016, which demanded the legal profession give better and more informed price information.
I was delighted to be the only individual to be invited to contribute to the report and attend the “round table” meeting of major legal stakeholders in September 2016.
The England & Wales Law Society ( “The Law Society “) published their own report PRICE AND SERVICE TRANSPARENCY TOOLKIT (“PSTT”) on 7th December 2016. http://bookshop.lawsociety.org.uk/ecom_lawsoc/public/saleproduct.jsf?catalogueCode=CMBT001.
Clearly, The Law Society have attempted to take the “wind out the sails” of the CMA report by publishing their report the week before. However, what they have done inadvertently, is justify my opinion that the standard billing practices of the majority of law firms in England & Wales are defective. The Law Society in their PSTT report ( see below for the relevant section) have correctly concluded that over head charges of law firms such as photocopying, postage etc are NOT DISBURSEMENTS, and should never have been charged for separately or at all.
I believe 100,000’s of legal bills have been sent by law firms to their clients in the last 12 months, the vast majority of which will contain these claims under heading “DISBURSEMENTS”.
Let me repeat, they are not DISBURSEMENTS and should not have been charged for separately or at all.
I suggest client’s should immediately request a refund from their law firms if these charged have been made under DISBURSEMENTS, even if the bill was paid within the last 12 months (http://www.legislation.gov.uk/ukpga/1974/47/section/70 see section 3 (c) ).
Once this issue is in the public domain, what faith will the public have over the reasonableness of the rest of the legal fees charged by the majority of law firms!
PRICE AND SERVICE TRANSPARENCY TOOLKIT PUBLISHED BY – LAW SOCIETY 7th DECEMBER 2016.
Page 4 Price and service information.
You should not describe overheads of you firm (such as normal postage, telephone calls and charges arising in respect of client due diligence under Money Laundering Regulations 2007) as disbursements.
Page 5 – Telling Clients about Disbursements
Disbursement is a well understood term in the legal world but it may not be a familiar term to clients.
Disbursements are defined by the Solicitors’ Accounts Rules 2011 (SAR) as “any sum that you spend or are going to spend on behalf of your client or trust, including any VAT element”.
The SRA is clear that a firm’s overheads are not considered to be disbursements.
The following should not be described as disbursements:
• annual subscription costs and transaction fees for using online solutions to manage business processes,
• telegraphic transfers,
• administration charges such as postage and photocopying,
• professional indemnity insurance, and
• the cost of undertaking client due diligence, including identification checks for anti-money laundering purposes.
“Cost lawyer Jim Diamond is determined to show that the system is iniquitous, arguing that major City law firms are guilty of massive over-charging. For a good while, he has been running something of a lone campaign against the way clients are charged by fellow lawyers. His latest assault can be found on the Legal Week website in an article headlined How law lost its soul – the epidemic of over-charging clients by City law firms“.
The Centre Policy Studies-“The Price of Law”
* The Client Guide to Controlling Legal Costs.
* The Law Society’s Tool Kit on Costs Management