LAW FIRMS DEFECTIVE BILLING PRACTICES.

‘Hundreds of thousands of clients may have cause to claim some of their money back if they have paid a legal bill in the last 12 months’.

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.

Background.- JIM DIAMOND COSTS LAWYER
Jim is regarded as one of the leading experts in the field of legal costs and legal budgets. He was awarded, UK  Legal Costs Lawyer of 2016 -by Legal Monthly.  Jim‘s “The Price of Law Report” was published by The Centre for Policy Studies, the leading right wing think tank in Feb 2016.  http://www.cps.org.uk/publications/reports/the-price-of-law/ .
Jim was described in in 2012 by Professor Roy Greenslade in The Guardian;

“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“.

Qualification/Status.
*UK Costs Lawyer of the Year 2016.
Costs Lawyer status

Major Publications 

The Centre Policy Studies-“The Price of Law”

http://www.cps.org.uk/publications/reports/the-price-of-law/

 

* The Client Guide to Controlling Legal Costs.

http://old.clerksroom.com/downloads/615-CLIENT-GUIDE-TO-LEGAL-COSTS–MARCH-2016.pdf


 

* The Law Society’s Tool Kit on Costs Management

http://bookshop.lawsociety.org.uk/ecom_lawsoc/public/saleproduct.jsf?catalogueCode=CMBT001

Jersey Law firm fees slashed by 80%

LEGAL COSTS UPDATE.

– Jersey Law firm fees slashed by 80%

I am delighted to report the result of a legal costs dispute I was involved in for a client in Jersey.

A full report of this case is on Page 1 and 2 of the Jersey Evening post.

NB– Of the 227 individual items of claim MADE BY THE LAW FIRM the court threw out 177..

http://jerseyeveningpost.com/news/2017/01/27/law-firms-60000-fees-slashed-by-80-per-cent/

The Price of Law

In The Price of Law leading legal costs expert Jim Diamond argues that the hourly rates charged by top London corporate law firms are so high that they risk restricting access to justice.

Hourly rates for a partner at a top London firm now exceed £1,000 – the highest level ever recorded. In nominal terms the top City of London law firms charge almost the same amount per hour as their American legal cousins except that the UK firms charge their clients in sterling.

Furthermore the report warns that charging by the hour rather than by the result – as is commonplace in other top corporate industry – is highly inefficient and a potential drain on productivity.

The report outlines three main causes for the rapid increase in hourly rates for top law corporate law firms:

  • the increasing complexity of the UK tax and legal systems;
  • the lack of transparency on legal costs that allows top law firms virtual control over their prices; and
  • a shortage of competition between practices – which is indicated by the remarkable similarity in the rates charged by top corporate law firms.

Jim Diamond explains:

“The top commercial law firms in the City of London are regarded as some of the best legal practices in the world, and are some of the most expensive providers of legal services. However they are also some of the least transparent, particularly in terms of pricing: while they do publish yearly statistics on the performance of their firm, from turnover to profit per partners, they do not publish information on the hourly rates charged to their clients.

Steps should be taken to ensure fair practice in legal procedure. The “billable hour” is an outdated and unsustainable billing method for legal services to continue. Alternative billing methods must be considered and legal procedure must be simplified to ensure that the legal market place thrives in the long term, and the price of law is not punitive.”

Lord Justice Jackson has now put forward proposals for moving to a fixed fee basis for all litigation work, suggesting that fees are capped, stating last month that:

Remuneration on a time basis rewards inefficiency. Unrestrained costs shifting drives parties to leave no stone unturned: the more costs mount up, the more determined each party becomes to ensure that the other party pays them. The result is inevitable – a civil justice system which is exorbitantly expensive.”

The Lord Chancellor should give full consideration to these proposals in order to ensure that the legal market place thrives in the long term, and that the price of law is not punitive.