Litigation is a potentially risky and expensive undertaking. Clients rely on their solicitors to inform them of the potential cost of pursuing a matter, including the risk of having to pay someone else’s legal fees, when making their decision as to whether the potential outcome is likely to justify the expense.
Solicitors not only have a duty to advise their clients of the potential costs and risk, but also to advise on the various ways that they can fund and/or de-risk the matter.
The SRA Handbook sets out the standards and requirements which the Solicitors Regulation Authority (“SRA”) expects their regulated community to achieve and observe.
At the heart of the Handbook are the SRA Principles. These are ten mandatory Principles which define the fundamental ethical and professional standards that are expected of all SRA regulated firms and individuals when providing legal services.
To ensure delivery of the Principles, The Handbook details the SRA Code of Conduct which contains the mandatory Outcomes which, when achieved, benefit users of legal services.
SRA regulated individuals must:
- uphold the rule of law and proper administration of justice;
- act with integrity;
- not allow their independence to be compromised;
- act in the best interests of each client;
- provide a proper standard of service to their clients;
- behave in a way that maintains the trust the public places in them and in the provision of legal services;
- comply with their legal and regulatory obligations and deal with their regulators and ombudsman in an open, timely and co-operative manner;
- run their business or carry out their role in the business effectively and in accordance with proper governance and sound financial and risk management principles;
- run their business or carry out their role in the business in a way that encourages equal opportunity and respect for diversity; and
- protect client money and assets.
SRA Code of Conduct – Client Care
This section of the SRA Handbook is about how an SRA regulated individual should provide a proper standard of service, which takes into account the individual needs and circumstances of each client. This includes providing clients with the information they need to make informed decisions about the services they need, how these will be delivered and how much they will cost.
Outcomes and Indicative Behaviours
To ensure that clients are fully aware of their cost and risk exposure, as well as their options to fund or de-risk the matter, the following Outcomes and Indicative Behaviours within the Handbook address the requirements of the regulated individual:
O(1.2) they must provide services to their client in a manner which protects their client’s interests in a matter, subject to the administration of justice;
O(1.6) they must only enter into fee arrangements with their client that are legal and they consider are suitable for the clients’ needs and take into account of the client’s best interests;
O(1.12) they must ensure that clients are in a position to make informed decisions about the services they need, how the matter will be handled and the options available to them;
IB(1.13) they must discuss whether the potential outcomes of the client’s matter are likely to justify the expense or risk involved, including any risk of having to pay someone else’s legal fees;
IB(1.14) they must clearly explain their fees and if and when they are likely to change;
IB(1.15) they must warn about other payments for which the client may be responsible;
IB(1.16) they must discuss how the client will pay, including whether public funding may be available, whether the client has insurance that might cover the fees, and whether the fees may be paid by someone else such as a trade union;
IB(1.17) where they are acting for a client under a fee arrangement governed by statute, such as a conditional fee agreement, they must give the client all relevant information relating to that arrangement;
IB(1.19) they must provide all information in a clear and accessible form which is appropriate to the needs and circumstances of the client.
Available funding and insurance
To ensure that their client is able to make a fully informed decision as to the best course of action to take, a solicitor should discuss all available fee arrangements (including conditional fee arrangements, damages based agreements, etc), private settlement of account, pre-existing insurance and third party funding options to properly protect their client.
To de-risk the matter a solicitor should explore any before the event insurance (“BTE”) that the client may possess or have access to. If no BTE is present then advice on the availability and cost of after the event insurance (“ATE”) should be delivered.
Failure to advise
Failure to advise of the funding and insurance options available to their client, may leave the solicitor and their firm open to regulatory sanction, increased professional indemnity insurance premiums and exposed to a potential professional negligence claim.