The Legal Services Regulation Act 2015 (LRSA) has updated the way solicitors deal with legal costs. Section 150 of the LRSA came into force on 7th October 2019, replacing the previous requirements under Section 68 of the Solicitors (Amendment) Act 1994.
This new section, among other things, increases the responsibility on solicitors to keep their clients updated in relation to the status of their legal costs, in turn creating greater transparency for clients in this area. The requirements also extend to barristers.
Upon receiving instructions from a client, a solicitor must provide a notice to that client, setting out the legal costs that will be incurred or, where not reasonably practicable to do so at that time, the basis upon which such costs are to be calculated. This is commonly referred to as a S.150 notice.
If it is not possible to set out the legal costs that will be incurred on taking instructions, further engagement with the client regarding costs will be necessary, giving rise to further notices.
A S.150 notice must satisfy certain requirements. It must specify:
- The costs incurred to date;
- The fixed and certain costs to be incurred;
- The costs likely to be incurred;
- VAT; and
- The basis of the calculation of the costs, with reference to such matters as time spent, complexity and urgency.
Solicitors should keep in mind that bills of costs are regulated under Section 152 of the LRSA and must fulfil the requirements thereunder.
Agreement regarding legal costs
As an alternative to a Section 150 notice, solicitors may enter into a written agreement with a client regarding the amount and payment of all or part of the legal costs. Such agreements must contain all the particulars required under S.150(4) of the LSRA in order to avoid the need for a separate S.150 notice.
There are additional requirements in relation to matters involving litigation. A solicitor must provide an outline of the work to be done in respect of each stage of the litigation process. The solicitor must detail the costs, likely costs or basis of the costs to be charged at each of those stages, including the likelihood of engaging a barrister, expert witnesses and other services.
Clients must also be informed of the financial and legal consequences if they decide to discontinue the litigation including the chance that they may have to pay the costs of one or more parties.
Updating the Client
There is an ongoing requirement to update the client on his/her legal costs. A new notice is required when factors arise which may result in a significant increase in the costs set out in the original S.150 notice and must be sent as soon as the solicitor becomes aware of them. This can be a challenging aspect given the fast-moving pace of some areas such as litigation.
A Section 150 notice must specify a period of time during which the solicitor must refrain from commencing to provide legal services. This acts as a ‘cooling-off period’ for the client. Legal services stay suspended until either confirmation to proceed is received from the client or the period has expired. There is no minimum period specified in the LRSA, but it must not exceed ten working days. Solicitors must exercise their discretion when determining the period and it may vary depending on the circumstances of the case. Such period applies to every subsequent S.150 notice issued to the client and not just to the initial notice. In certain circumstances the ‘cooling off period’ can be disregarded.
Failure to comply with Section 150
A pivotal difference between the old costs’ regime under Section 68 and the new Section 150 regime is the consequence for failing to comply.
Where a bill of costs is being adjudicated by a Legal Costs Adjudicator (LCA) and a charge or item has been omitted from the Section 150 notice, the LCA does not have the authority to confirm same, unless he/she is of the opinion that to exclude the charge or item would create an injustice between the parties.
An act or omission in relation to the S.150 notice requirements may constitute misconduct, where such act or omission amounts to a breach of the LRSA or regulations made under it. Misconduct may also arise in situations where legal practitioners seek costs that are grossly excessive.
For further advice, please do not hesitate to contact our office by email at [email protected].
Written by – Kimberley Hayden, Trainee
Dated 13 May 2020
Crowley Millar Solicitors LLP Disclaimer: This is a general information note and is intended for information only. It does not constitute legal advice and should not be regarded as a substitute for legal or other professional advices. Such advice should always be taken before acting on any of the matters referenced in this information note.