Rule 15 Letters Should Be Revised Regularly

 

That’s rather what I was afraid of!  You see, these letters do need revising from time to time, and there have been several developments in recent times which really call for an overhaul, so if the letter is still in the format it was even a couple of years ago, you should be looking to bring it up to date.

 

 

I can appreciate the problem, but I’m afraid the reality is that it is likely to get longer.  What you may have to do is to be inventive as to your presentation methods.  At the moment, it seems you combine a letter of engagement, setting out what work you are going to do for the client, with your terms of business, i.e. the principles on which you are prepared to do that work.  There is no need for those two to be in the same document, and what you may wish to think about is putting all standard terms into some form of leaflet, to be given to the client at the same time you send the letter, with all the individual details and variables. 

 

Indeed, in some cases, you might want to split it even further.  In matters such as personal injury work, where there is an obligation to explain a wide variety of types of funding which might be available and / or appropriate, you might have a different leaflet, in addition to the other two, setting out those possibilities.

 

 

No, you are still under an obligation to make sure that all clients actually get the relevant information, so you must ensure that this is sent to them. What’s more, you should be able to prove that they have had it, and agreed to its application.  You really should always be getting clients to acknowledge in writing that they consent to your terms.

 

 

There are some things that you have to put in, and some that you may well want to put in for your own protection.  Let’s start with money laundering.  You are not obliged to put anything in your paperwork about this, but you would be well advised to do so.

 

 

For a start, you can make it clear that you are subject to the Money Laundering Regulations for all or some of your work, and that you will, where those regulations apply, need to ask clients for suitable identification, and be unable to proceed with any work on their behalf without completing those checks.  Some people seem to feel that you can go on acting for some weeks, even if the identification checks have not been completed, and that really isn’t the case.

 

That’s a matter for your judgement.  You can if you wish, and it will not be ‘tipping off’ if you do, but I think you will need to be somewhat diplomatic as to the language you use.

 

 

The first thing is to set out your policy on handling cash.  Obviously it is a possible indicator of problems if someone turns up with a carrier bag stuffed full of tenners, so you may wish to make it clear at the outset what your cash handling policy is, i.e. are you prepared to rake any cash payments at all and, if so, what is the maximum you are prepared to take.  My own suggestion would be to keep that figure pretty low.

 

Another thing is the timing of payments.  A nightmare scenario is getting money just before the completion of a transaction in circumstances which trigger a report to the National Criminal Intelligence Service (‘NCIS’) and then having to wait for their consent to proceed with the transaction but being unable to tell anyone why.  If you put in a term requiring cleared funds to be with you not less than seven working days before completion, then that will parallel the first of the two periods that NCIS has for consideration.  If the money comes late, at least you can point out to the client that he has failed to comply with a contractual term.

 

 

Yes, there is.  Did you see a large package in from the Law Society recently about the Financial Services Authority?

 

 

Go and dig it out again, and read it!  The point is that the FSA is taking on the regulation of some bread and butter work that virtually all High Street firms will find themselves involved in.  For one thing, they are now regulating all mortgage work, and the old voluntary code has gone.  For another, they are going very soon to be regulating all long term insurance contracts, and all general insurance contracts.  That means that policies for matters such as long term care, defective title indemnity, restrictive covenant indemnity, and missing beneficiary cover, are all going to be under the new regime.

 

 

Provided that this work is ancillary to your main activities, you do not have to be directly regulated by the FSA.  The Law Society acts as what’s called a Designated Professional Body, and effectively acts on the FSA’s behalf.  You will have to be registered with the FSA, and the Society will ensure that all firms are.  In due course, you will have to nominate someone to take responsibility for compliance as far as these matters are concerned.  In the meantime it will be the Senior Partner, by default.

 

 

The FSA requires that certain information is given to all clients for whom business of this sort is being done.  You could of course do this at a later stage, when it becomes clear that the matter is going to involve some work subject to these regulations, but that will involve fee earners remembering to do the notification in midstream.  You may feel it is much safer to give the information up front, to all clients, so that you know that you are always going to be in the clear when work of the relevant kind crops up.

 

 

There are two things.  The first is that you have to tell the client the regulatory position.  The Law Society Guidance, at Part 7, sets out various options for the phrasing of this, but essentially what you need to tell them is that

 

The FSA requires that certain information has to be given to the client abut their right to complain if things go wrong.  Again, there is wording provided in the Guide, at part 7.  You would think this would sit happily alongside our existing code, which of course has long required all clients to be told who to contact if they have any concerns.  There is one difference, however.  The existing requirements do not specify that the word ‘complaint’ needs to appear anywhere.  Many firms have appreciated that, as they feel it is sending the wrong message to a new client to be telling him about complaints at the start!  (Other firms, however, not having read the existing rules properly, have never realised that that is the case!)  The new rules do require the wording to refer specifically to complaints.

 

 

There has indeed.  The first thing to take note of is that the Courts have increasingly been indicating that they will give the force of law to Rules made under the Solicitors Act.  So, if something is required by the Rules, and the firm does not comply with them, then the firm may get penalised.  For instance, if the firm fails to give the costs information required, especially its best estimate as to the costs to be incurred, and to keep that updated, then the firm has a real problem.

 

 

If a firm gives an estimate, but then incurs costs beyond that figure without notifying the client of a revised estimate, then it will be entitled to recover nothing over and above the initial sum.  That may apply even if the client has already paid sums over and above the initial estimate, by way of interim invoices – the firm may have to pay the excess back..

 

 

That’s fine, but what information do you put into the system?  Let’s say you have an agreed limit of £2,000 in a case, and you’ve run up £1,500 of time costs, and paid £200 of disbursements, are you happy?

 

 

What if you have already instructed Counsel, and the fee earner has a fee note from Counsel on file for £750.  Still happy?

 

 

Quite right.  You face the possibility of having to pay Counsel, and only being able to recover £300 from the client towards his fee.  The point is that these accounting tools for warnings are generally only any good if you operate an unbilled disbursements ledger, so you can keep track of the liabilities you have incurred, even if they have not yet crystallised.

 

Yes.  The Rules require that various pieces of information have to be given to a client as to the personnel involved.  This covers

 

Any of those pieces of Information may change, for perfectly natural reasons.  The firm may however be in peril if the changes are not notified to the client.  Everyone needs to be aware of the need for notification in such circumstances.  Don’t forget the case where the client thought they were dealing with a solicitor, but found that the fee earner was not admitted, and was not obliged to pay the firm a penny, even though there was no complaint about the work itself!

 

I know, it’s a real problem for firms.  You may well find that some help from a marketing consultant or graphic designer may help – simply as to the techniques which will help to present a large amount of information in as clear a fashion as possible.  But you can’t ignore the fact that the client may not haul n all the information you give them, and it’s still your responsibility to make sure they understand the important bits.  So you may need to explore with them how much they have understood, and how much you can help them with by going through it with them.  And don’t forget to make proper file notes of that conversation.  Good luck!

 

 

Simon Young MBA is a solicitor and management consultant.

 

syoung@eurobell.co.uk