Solicitors’ Costs

The entirely false allegation that a solicitor charged his client £300 per hour while he was enjoying himself on the golf course will raise few eyebrows to anyone who has had the misfortune to find themselves on the wrong end of a solicitor’s bill.

In the recent case the blameless solicitor was entirely vindicated but many other reputable solicitors still indulge in a dubious practice condemned last month by the Master of the Rolls, Lord Neuberger condemned last month: charging an hourly rate for their services.

This represents such a bad deal for clients for so many reasons that it is hard to know where to begin. Most obviously, the client is unlikely to have the faintest idea how much the work will cost before he starts. The solicitor may provide an estimate, but it will probably be hedged around with so many provisos as to be all but worthless.

Then there is the inescapable fact that paying an hourly rate rewards the lazy and inefficient The solicitor who dithers, drifts and waffles will charge you more than one who writes a short crisp letter that solves your problem.

Thirdly, it is in practice all but impossible to check that the solicitor has in fact done the work he claims to have done. If he says something took 2 hours it is probably impossible to contradict him.

But the most important reason why hourly rates almost invariably represent a terrible deal for clients is more subtle. Hardly anybody outside the legal profession realises that solicitors who charge “by the hour” generally do no such thing. Instead the convention is that they charge in six minute “units”. What difference does that make? Well, say your solicitor makes a phone call, taking him perhaps 2 minutes. If he was actually charging by the hour (perhaps at the comparatively modest (!) rate of £300 per hour) that call would cost you £10. But since he is charging by the six minute unit, the 2 minutes will be rounded up (for some reason never down) and instead it will cost you £30. Let us suppose that the next day he makes another 2 minute phone call. That will cost you another £30. So for 4 minutes work he can actually charge you £60 instead of the £20 that you would have incurred had he been charging at a genuine hourly rate. Over the course of a long case this will make a substantial difference to your bill, which of course is the whole point.

But it does not stop there. Since the solicitor is paid by how many of these six minute units he can rack up he naturally has to spend a good part of his time scrupulously making notes of how he is spending his time. That administrative task itself takes up quite a lot of time which you will probably find is then incorporated – in six minute units – into your bill.

It can get even worse. Another once common practice, still occasionally seen, is to calculate the bill on an hourly rate basis and then add a further sum for “care and consideration”. This will no doubt be legally watertight with the solicitor’s entitlement to charge in this way spelt out in the agreement. But it must be open to question as to whether every worried and nervous client always appreciates exactly what a blank cheque this can give to the solicitor. Madonna’s divorce was handled by Fiona Shackleton, the divorce lawyer of choice for the super rich, who added a £75,000 “mark up” above the basic £85,000 bill to reflect the fact that she carried out “extensive work on complex issues … at anti-social hours and under considerable pressure.” Although the celebrity chanteuse herself was apparently quite happy with this arrangement, which was perfectly legal, it is possible that clients with shallower pockets might find such an approach hard to understand. Surely the reason they are paying hundreds of pounds per hour in the first place is because they expect the solicitor to carry out extensive work on complex issues?

Such opaque billing practices are not only a disfigurement to our legal system in themselves. They also provide ample opportunity for the outright dishonest solicitor Cases such as that of top city solicitor Christopher Grierson gaoled last week for a £1.3M fraud, show that not even the smartest firms can necessarily prevent fraudulent behaviour by their partners, but the practice of calculating bills by an hourly rate certainly makes theft remarkably easy to effect and all but undetectable.

It is possible for a client who is dissatisfied with his bill to ask a costs judge to assess the solicitor’s claim to see if it is reasonable. But the first thing that then happens is that the solicitor will draw up a detailed breakdown of costs, a time consuming exercise, the costs of which will – this should be no surprise – be added to the disputed bill. If the client still does not accept the bill he is faced with another round of litigation that can easily end up more expensive and complicated than the original dispute.

It is all very well to say that market forces will ensure that solicitors should be able to charge what the market will bear, but market forces cannot work if solicitors’ billing practices are incomprehensible. Moreover, in litigation much of the successful solicitor’s bill will have to be paid by the losing side who of course have had no say at all in how it is calculated.

To the fury of many solicitors Lord Neuberger has declared that the days of hourly billing may be numbered. The sooner it becomes a thing of the past the better.

June 12th 2012