Lawyers advised to give “best and worst case scenario” on fees.
More than a quarter (26%) of complaints to the Legal Ombudsman (LeO) are triggered by lack of clarity on fees, a major internal survey has found.
The study of 4,307 complaints received by LeO between 1 June 2014 and 31 January 2015 showed that family law was by far the biggest source of complaints about unclear pricing, followed by wills and probate.
Family work accounted for 23% of these complaints, followed by wills and litigation, both with 14%. Residential conveyancing was the next biggest offender, with 13%.
Only 6% of complaints were caused by personal injury matters, and 5% by crime and employment.
The survey was requested by the Legal Services Board (LSB), which was particularly concerned about the use of damages-based agreements (DBAs).
In the report, LeO said litigation and employment were the two areas it expected to have a “high number of relevant complaints”.
However, the ombudsman said that people were “often at their most vulnerable” when seeking advice on family matters, and on wills.
In a family law case study included in the survey, LeO said a law firm estimated its total costs at £20,000 plus VAT and disbursements. Without sending any further bills, it invoiced the client over two years later for more than £65,000.
The ombudsman found that failure to provide revisions to the bills amounted to poor service and recommended that the firm reduce the final bill by £5,000.
In another case study, this time involving a will, LeO said a man suffering poor health was quoted £3,500 and £5,000 excluding VAT, but came to LeO when the costs reached £12,000 and the work was not finished.
LeO found that the experience had damaged the client’s health, and recommended that the firm reimburse him 25% of the fees and pay £750 in compensation for the impact on his illness.
The ombudsman said that it was often “not the costs that are the problem, but the costs estimates being unrealistic, cost information being unclear and costs rising without the consumer’s knowledge”.
LeO suggested that firms give clients a range of prices, for example in a litigation case, depending on whether the case was resolved by early settlement, mediation or at trial, to ensure clients had a “best and worst case scenario”.
Although it had not seen “any issues around DBAs or ‘no win, no fee’ funding methods specifically during this time period”, there were still “challenges around lack of price transparency” for other funding models.
LeO encouraged the LSB to continue to monitor these agreements, bearing in mind the changing legal market, introduction of alternative business structures and extension of its jurisdiction to include claims management companies in January this year.
The LSB agreed with LeO’s conclusions on lack of transparency. The super-regulator said it would be writing to legal regulators to highlight the report’s findings and “remind them of our expectation that they monitor developments in the area of price transparency” to ensure good outcomes.
Am I right in thinking that under the last Ombudsman, LeO tended to emphasize the problems with non-traditional fee arrangements like DBAs? Could never really back it up with data, and now says it’s not seen any issues on such fee agreements during the period. Is that a fair analysis by me? Quite extraordinary if so.