The new Standard Contractual Terms (SCT) are causing a bit of a kerfuffle between barristers and solicitors. What’s that you say, at a time with the legal profession facing unprecedented attacks from all around them they are having their own private scrap. Well maybe. I’m not so sure if this isn’t a scrap between the representative bodies; the Bar Council and the Law Society. I believe that their respective memberships will deal with the challenges of the new SCT rather better.
In a nutshell the Bar Council have introduced standard terms of engagement which all barristers are being strongly advised to use when instructed by solicitors in order to govern their professional relationship. The problems stem from differing views of some of the specific terms. In reality there is one huge issue which stands out from all the rest that of payment terms. I am going to concentrate on that most thorny of issues.
For the last 25 years the relationship between barrister and solicitor has been governed by The Terms of work on which Barristers Offer their Services to Solicitors and the Withdrawal of Credit Scheme 1988. The scheme states:
“By the established custom of the profession a barrister looks for payment of his fees to the solicitor who instructs him and not to his lay client”
“a solicitor is personally liable as a matter of professional conduct for the payment of a barrister’s proper fees whether or not he has been placed in funds by his lay client”
If a solicitor could not or would not pay the barrister could, after sending certain properly phrased reminder letters, report the matter to the Bar Council. They would then investigate the matter and send a very stiff letter to the Senior Partner of the firm of solicitors. If this elicited no response then the firm would be (dan dan dahhhhn) blacklisted. The firm would then find they were forced to pay in advance for all barristers fees in future as the Bar Council would inform all chambers about these cads and bounders. There is an obvious flaw to this system, the barrister who reported the firm would still not have been paid. Never mind I am sure the warm glow he got from ensuring none of his fellow barristers suffer the same fate keep him warm at night.
Once you get beyond the poor chap who didn’t get paid this doesn’t look like a bad system, someone gets burned but the majority are protected in future. There was a bit of a problem. It took a very, very long time to get to the point where a firm was blacklisted. First you have to send the obligatory reminder letters. This process, allowing for time for responses, took a minimum of three months. Then you would send off your report to the Bar Council and it would take them about 12 months to leap into action. I am sure that in times gone by this process was much swifter but a steady increase in solicitors being reported for non payment must have put a strain on the Bar Council fees collection department.
- In 2011 the Bar Council¹ received reports from barristers concerning 2,315 unpaid fee notes which totalled £5.2 million.
- In the same year £2.5 million was recovered.
- This left £2.7 million in unpaid fees.
The new Standard Conditions of Contract for the Supply of Legal Services by Barristers to Authorised Persons 2012 (to give them their full title) include a couple of very important clauses:
12.6 If the Invoice remains outstanding more than 30 days from the date of delivery, the Barrister is entitled:
12.6.1 to the fixed sum and interest in accordance with the Late Payment of Commercial Debts (Interest) Act 1998;
12.6.2 to sue the Authorised Person for payment
To my mind in strictly commercial terms this seems pretty sensible. I provide a service if you don’t pay for that service I can seek redress through the courts and charge interest on the unpaid fees for the delay in payment.
The SCT replaces the old Withdrawal of Credit Scheme and so if no terms have been agreed between barrister and solicitor there is no means of redress for an unpaid fee. Barristers have no choice, fail to agree terms and you risk not being paid for the work.
The Law Society provided a practice note to it’s members with a view to varying some parts of the SCT. This guidance was released on the 24th January 2013 only 7 days before the SCT were due to commence. The Bar Council first posted the details of the SCT on their website on the 2nd August 2012 with a planned date of introduction of the 31st October 2012. This date was pushed back to the 31st January 2013 to allow proper time for preparations to be made.
I do not know what has happened here but 3 months notice, which was then extended to 6 months notice, of this seemingly huge change seems plenty of time for all concerned to properly prepare. Whether the Bar Council and Law Society have not properly communicated with each other or whether one or other or both has failed to act promptly is not something I can comment on. What is clear is that someone has cocked up. Why could terms not be agreed by both representative bodies prior to their launch?
The Law Society practice note was very swiftly followed by Bar Council guidance on the proposed revisions. There are all sorts of issues around liability and insurance but I don’t want to get bogged down in the minutiae of all the clauses in dispute. The issues they present seem legal and fundamental and will need to be settled by the representative bodies. The issue regarding payment of fees seems less important but is in fact the real crux of the matter. The Law Society states:
“Clause 12.4 requires the solicitor to pay the barrister’s invoice within 30 days irrespective of whether or not the solicitor has been put in funds by the client. While this broadly reflects the existing position whereby solicitors are liable for a barrister’s fees whether or not the barrister has been put in funds, it is open to you to agree that the barrister should not be paid until the solicitor has been paid by the client. Any such agreement should be recorded in writing”
The advice to solicitors seems to be whilst you are liable for the barrister’s fees you can use this opportunity to pass that liability back to the barrister. What course of action does the barrister then have if the client refuses to pay the solicitor. The barrister cannot sue the client and the variation to the terms which the Law Society recommends is :
“the Authorised Person shall not be liable for the Barrister’s fees until the Authorised Person has been put in funds by the Lay Client, the payment provisions of the Agreement shall apply only from the date upon which the Authorised Person has been put in funds by the Lay Client in respect of the Barrister’s fees”
So the barrister has no way to escalate the problem if the fee is not paid. In it’s present form the amendment proffered by the Law Society seems unlikely to be adopted by the Bar.
This is by no means a straight forward issue. In some cases it can be extremely difficult or even impossible for the client to put the solicitor in funds prior to the case being heard. As the senior clerk of a specialist family set I see the problem on a daily basis in matrimonial finance cases. In cases where the clients are not cash rich and rely on the division of assets, which are subject to dispute and can often only be liquidated at the conclusion of the case, there are no funds immediately available. The most obvious example is the former matrimonial home. The solicitor is aware of the client’s financial situation but is also aware that once the assets are divided the client will have no difficulty settling the bill. There are two fundamental problems with this type of situation. First and foremost the property market is not particularly buoyant and sale of a property can take an indefinite amount of time. The second problem is that solicitors do not always make the barrister or indeed his clerk aware that settlement of fees is subject to the sale of a house.
The SCT can be amended on a case by case basis and if some appropriate wording could be agreed between barrister and solicitor situations such as these could be managed.
The excellent Catherine Bakshi of the Law Society Gazette published a piece on 25th January 2013, Society and Bar clash over new standard terms, and in itself is well worth a read. What are particularly interesting to me are the comments. The vast majority of those who have commented can see no issue with ensuring funds are in place in advance of work being completed. One or two even explain the need for transparency with barrister and clerks where there will be difficulties in paying within 30 days. It seems that in a very brief straw poll the membership of the Law Society see no great problem. There are those who disagree and whilst buying power threats are all well and good, what if all barristers stand firm and there is no option but to agree to the terms? Do the work yourself, surely if you could do it yourself there would be no need to outsource it to counsel.
The relationship between barrister and solicitor has shifted enormously since I first started clerking. Back in those happy halcyon days solicitors did far less advocacy and drafting preferring instead to outsource the work to counsel. Barristers dealt with cases from initial advice all the way through to final hearing. If some portion of the fee was not recoverable then a barrister would probably “share the hit”. Now barristers perform a different role, often parachuted into cases which have become overwhelmingly complex or where a solicitor feels a fresh aspect on the case is needed. Barristers are routinely used as temporary staff to cover sick leave or holidays where no fee earner is available. In both such circumstances a barrister’s input may be limited to attending one hearing. The solicitor may have been paid a large portion of his fees on account as the case progressed. Why should a barrister potentially take the risk of a hit on 100% of his fees where the solicitor is only taking a 25% hit?
Barristers and clerks alike do not fully appreciate the difficulties that solicitors have in keeping clients happy whilst at the same time ensuring they get paid for the work done. I do not envy the difficult position they find themselves in and I am sure it is incredibly frustrating to perform a service and not be paid.
Where does this leave us? There will be some difficulties in getting standard terms that both barrister and solicitor agree but it will happen. A few difficult questions need to be asked of both representative bodies.
Why after a decade of debates are both representative bodies (who make their respective livings settling disputes) still so far apart?
Why were solicitors only given guidance by their representative body only 7 days before the new terms began?
When it was clear there was a problem why have the LSB not stepped in to resolve the matter?