The Association of Costs Lawyers (ACL) has proposed an alternative to handing lower-value costs disputes to the Legal Ombudsman, suggesting an online portal with preliminary decisions from a panel of specialist lawyers instead. The recommendation came in response to the Civil Justice Council’s consultation on reforming part III of the Solicitors Act 1974. The ACL also flagged a fundamental lack of data on the volume and nature of solicitor-client assessments, which it said makes it difficult to inform the proposed changes.
Why the Legal Ombudsman may not be the right fit
The Civil Justice Council recommended that all costs disputes worth up to £50,000 should be dealt with by the LeO. The ACL said it was concerned that the ombudsman “lacks the requisite expertise and capacity to deal with costs assessments and that this would not necessarily result in more proportionate disputes”.
Instead, the ACL wants an online portal — similar to the Official Injury Claim portal — where parties can exchange information and make offers. If no settlement is reached, a suitably qualified lawyer from a panel made up of costs lawyers, solicitors, barristers and chartered legal executives could make a preliminary determination. Complex matters would be referred to the court.
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For parties unhappy with the panel’s decision, the ACL recommends using the current provisional assessment regime. That means a determination on paper and a possible oral hearing for cases worth up to £75,000. If the court does not change the panel’s decision by at least 20%, the issuing party should bear the costs.
A pre-action protocol to cut down disputes
The ACL argues the process should start with a pre-action protocol requiring early transparency and disclosure. Members of its working group said disputes often arose because clients lacked basic information — for example, some wrongly believed they had not received fee estimates or a copy of their retainer.
The association said: “Often the position did not become clear until proceedings had been issued and an order for disclosure was made making the inspection of the files possible, at substantial cost and time to the court, the parties and their legal representatives.”
Requiring a questionnaire or copies of documents when a costs dispute is raised would help resolve matters early, without proceedings being issued, it added. The current system can drag people into court before the facts are even clear. A simpler front-end process could save time and money for everyone involved, though the details of how such a portal would work in practice have not yet been fully spelled out.
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Concerns over the ‘fair and reasonable’ principle
The ACL also took issue with the CJC’s proposed overarching principle that solicitor-client charges be ‘fair and reasonable’, judged on an objective basis. The association said this “significantly departs from the scope of the current Act and is contrary to orthodox jurisprudence” — particularly the subjective element of the reasonableness test.
There is a risk of a disconnect between inter partes and solicitor-client assessments, the ACL warned, which is especially problematic because the two are often linked. A valid retainer must exist between solicitor and client to recover costs on an inter partes basis, and the difference between what is recovered from the other party and what is claimable from the client results in a shortfall the client must pay.
The association also said that if the principle were extended to contractual terms, it could have the unintended effect of increasing the number of solicitor-client assessments. Hourly rates, for example, are not often challenged because they usually form part of the agreed contract. Solicitors should be able to rely on specific contractual terms with prospective clients to uphold competition, the response said. The ACL recommended that the ‘fair and reasonable’ principle apply only to the amounts actually charged.
Warnings on mandatory ADR and the Solicitors Act
The ACL’s response also proposed changes to the SRA code of conduct, which it said barely mentions costs. It warned that if the CJC proceeds with mandatory ADR for costs disputes worth over £50,000, the imbalance between sophisticated, legally represented solicitors and often unrepresented lay clients should be addressed. As the ACL put it, the mediator should not simply be “a referee in an unfair fight”.
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ACL council member Amy Dunkley, who sits on the policy committee that drafted the response, said the Solicitors Act needs updating but that the consultation paper has omissions that need addressing — such as solicitors seeking payment of bills as debts. “Everyone is concerned that the LeO is a long way from even being in a position to think about taking on costs disputes, but work on our model of a pre-action protocol and expert panel could begin at once and would likely have much the same impact,” she said.
Dunkley urged caution when amending or repealing elements of the statute. “The Solicitors Act 1974 consolidates case law that has built up over 200 years and abolishing large sections could render agreements unlawful as an unintended consequence. As experts in the field, we stand ready to assist.”
In June, LeO chief executive Phil Cain said it was open to discussing replacing the courts for costs disputes but would not be in a position to do so for some time.