law society practice rules

Rule 2 is designed to help both you and your clients understand each other’s expectations and responsibilities. In particular, the purpose of 2.02 (client care) and 2.03 (costs) is to ensure that clients are given the information necessary to enable them to make appropriate decisions about if and how their matter should proceed.

Under rule 5 (business management) a principal in a firm, a director of a recognised body which is a company and a member of a recognised body which is an LLP, must effect supervision and put in place management arrangements to provide for compliance with rule 2. The rule does not apply to your overseas practice but you must comply with 15.02.

Rule 2 – Client relations

2.01 Taking on clients

(1) You are generally free to decide whether or not to take on a particular client. However, you must refuse to act or cease acting for a client in the following circumstances:

(a) when to act would involve you in a breach of the law or a breach of the rules of professional conduct;

(b) where you have insufficient resources or lack the competence to deal with the matter;

(c) where instructions are given by someone other than the client, or only one client on behalf of others in a joint matter, you must not proceed without checking that all clients agree with the instructions given; or

(d) where you know or have reasonable grounds for believing that the instructions are affected by duress or undue influence, you must not act on those instructions until you have satisfied yourself that they represent the client’s wishes.

(2) You must not cease acting for a client except for good reason and on reasonable notice.

2.02 Client care

(1) You must:

(a) identify clearly the client’s objectives in relation to the work to be done for the client;

(b) give the client a clear explanation of the issues involved and the options available to the client;

(c) agree with the client the next steps to be taken; and

(d) keep the client informed of progress, unless otherwise agreed.

(2) You must, both at the outset and, as necessary, during the course of the matter:

(a) agree an appropriate level of service;

(b) explain your responsibilities;

(c) explain the client’s responsibilities;

(d) ensure that the client is given, in writing, the name and status of the person dealing with the matter and the name of the person responsible for its overall supervision; and

(e) explain any limitations or conditions resulting from your relationship with a third party (for example a funder, fee sharer or introducer) which affect the steps you can take on the client’s behalf.

(3) If you can demonstrate that it was inappropriate in the circumstances to meet some or all of these requirements, you will not breach 2.02.

2.03 Information about the cost

(1) You must give your client the best information possible about the likely overall cost of a matter both at the outset and, when appropriate, as the matter progresses. In particular you must:

(a) advise the client of the basis and terms of your charges;

(b) advise the client if charging rates are to be increased;

(c) advise the client of likely payments which you or your client may need to make to others;

(d) discuss with the client how the client will pay, in particular:

(i) whether the client may be eligible and should apply for public funding; and

(ii) whether the client’s own costs are covered by insurance or may be paid by someone else such as an employer or trade union;

(e) advise the client that there are circumstances where you may be entitled to exercise a lien for unpaid costs;

(f) advise the client of their potential liability for any other party’s costs; and

(g) discuss with the client whether their liability for another party’s costs may be covered by existing insurance or whether specially purchased insurance may be obtained.

(2) Any information about the costs must be clear and confirmed in writing.

(3) Where you are acting for the client under a conditional fee agreement you must explain the following:

(a) the circumstances in which the client may be liable for his or her own costs and for the other party’s costs;

(b) that even if successful the other party may not be ordered to pay all or any of the costs or may not be in a position to pay them;

(c) that the costs that the paying party is ordered to pay will not necessarily be all of the costs for which the client is liable, and whether you will seek payment of these from the client;

(d) if you intend to seek payment of the balance of costs from the client over those recovered from the paying party you should advise the client of the right to assessment of the bill;

(e) whether the client has any insurance that may meet the other party’s costs and if not whether it is advisable to obtain insurance for this purpose; and

(f) if you have an interest in recommending a particular policy or other funding arrangement you should declare it.

(4) Whether you are acting for a publicly funded client you must explain the following:

(a) the circumstances in which they may be liable for their own costs and the other party’s costs;

(b) the effect of the statutory charge;

(c) the client’s duty to pay any fixed or periodic contribution assessed and the consequence of failing to do so; and

(d) that even if your client is successful, the other party may not be ordered to pay costs or may not be in a position to pay them.

(5) You must discuss with your client whether the potential outcomes of any legal case will justify the expense or risk involved including, if relevant, the risk of having to pay an opponent’s costs.

(6) If you can demonstrate that it was inappropriate in the circumstances to meet some or all of these requirements, you will not breach 2.03(1) and (2).

2.04 Complaints handling

(1) If you are a principal in a firm you must ensure:

(a) that the firm has a written complaints procedure and that complaints are handled promptly, fairly and effectively in accordance with it;

(b) that the client is told, in writing, at the outset:

(i) that, in the event of a problem, the client is entitled to complain; and

(ii) to whom the client should complain;

(c) that the client is given a copy of the complaints procedure on request; and

(d) that once a complaint has been made, the person complaining is told in writing:

(i) how the complaint will be handled; and

(ii) within what time-scales they will be given an initial and/or substantive response.

(2) If you can demonstrate that it was inappropriate in the circumstances to meet some or all of those requirements, you will not breach 2.04.

(3) You must not charge your client for the cost of investigating a complaint.

2.05 Commissions

If you are a principal in a firm you must ensure that your firm pays to your client commission received over £20.00 unless the client, having been told of the amount, or if the precise amount is not known, an approximate amount or how the amount is to be calculated, has agreed that your firm may keep it.

2.06 Limitation of civil liability by contract

If you are a principal in a firm you must not exclude or attempt to exclude by contract all liability to your clients. However, you may limit civil liability, provided that such limitation is not below the minimum level of cover required by the Solicitors’ Indemnity Insurance Rules for a policy of qualifying insurance, and the agreement is in writing.

Guidance to rule 2 – Client relations

General

1. You should note that a material breach of 2.02, 2.03 or 2.04 may provide evidence against a solicitor, an REL or a recognised body of inadequate professional services under section 37A of the Solicitors Act 1974. The powers of the Law Society on a finding of inadequate professional service include disallowing all or part of the solicitor’s or REL’s costs and directing the solicitor or REL to pay compensation to the client. Section 37A does not apply to you if you are an RFL. Solicitor and REL partners in a multi-national partnership (MNP) are subject to section 37A in respect of services provided by the MNP.

Taking on clients – 2.01

2. 2.01 identifies some situations where you must refuse to act for a client, or if already acting, must stop doing so.

3. Your right to decide note to accept instructions is subject to restrictions, including the following:

(a) You must not refuse for a reason that would breach rule 6 (avoiding discrimination).

(b) Rule 11 (litigation and advocacy), governing a solicitor or REL acting as an advocate, contains restrictions on when the solicitor or REL may refuse instructions.

(c) See the Criminal Contract Regulations for restrictions on when you can refuse to act or cease acting for a publicly funded client in a criminal matter.

4. If you are an in-house solicitor or in-house REL you are already in a contractual relationship with your employer who is for the purpose of these rules, your client. You are not therefore necessarily as free as a solicitor or REL in a firm to refuse instructions, and will need to use your professional judgement in applying 2.01.

5. 2.01 sets out situations in which instructions must be refused. These might include the following:

(a) Breach of the law or rules

(i) conflict of interests between you and your client or between two or more clients – see rule 3 (conflict of interests);

(ii) where money laundering is suspected (see Proceeds of Crime Act 2002, the Money Laundering Regulations 2003, other relevant law and directives, and guidance issued by the Law Society on this subject); and

(iii) Where the client has a legal disability, for example lacks mental capacity, or is a child. If a client loses mental capacity after you have started to act, the law will automatically end the contractual relationship. This is a particularly complex legal issue and you should satisfy yourself as to the law before deciding on your course of action. However, it is important that the client, who is in a very vulnerable situation, is not left without legal representation.

(b) Insufficient resources

Before taking on a new matter, you must consider whether your firm has the resources – including knowledge, qualifications, expertise, time, sufficient support staff and, where appropriate, access to external expertise such as agents and counsel – to provide the support required to represent the client properly. The obligation is a continuing one, and you must ensure that an appropriate or agreed level of service can be delivered even if circumstances change.

(c) Duress or undue influence

It is important to be satisfied that clients give their instructions freely. Some clients, such as the elderly, those with language or learning difficulties and those with disabilities are particularly vulnerable to pressure from others. If you suspect that a client’s instructions are the result of undue influence you need to exercise your judgement as to whether you can proceed on the client’s behalf. For example, if you suspect that a friend or relative who accompanies the client is exerting undue influence, you should arrange to see the client alone or if appropriate with an independent third party or interpreter. Where there is no actual evidence of undue influence but the client appears to want to act against their best interests, it may be sufficient simply to explain the consequences of the instructions the client has given and confirm that the client wishes to proceed. For evidential purposes, it would be sensible to get this confirmation in writing.

6. As a matter of good practice you should not act for a client who has instructed another firm in the same matter unless the other firm agrees. If you are asked to provide a second opinion, you may do so but you should satisfy yourself that you have sufficient information to handle the matter properly.

Ceasing to act

7. A client can end the retainer with you at any time and for any reason. You may only end the relationship with the client if there is a good reason and after giving reasonable notice. The retainer is a contractual relationship and subject to legal considerations. Examples of good reasons include where there is a breakdown in confidence between you and the client, and where you are unable to obtain proper instructions.

8. If there is good reason to cease acting, you must give reasonable notice to the client. What amounts to reasonable notice will depend on the circumstances.

For example, it would normally be unreasonable to stop acting for a client immediately before a court hearing where it is impossible for the client to find alternative representation. In such a case, if there is no alternative but to cease acting immediately, you should attend and explain the circumstances to the court – see rule 11 (litigation and advocacy). There may be circumstances where it is reasonable to give no notice.

9. The relationship between you and you client can also be ended automatically by law, for example by the client’s bankruptcy or mental incapacity (see note 5(a)(iii) above).

10. When you cease acting for a client, you will need to consider what should be done with the paperwork. You must hand over the client’s files promptly on request subject to your right to exercise a lien in respect of outstanding costs.

You should try to ensure the client’s position is not prejudiced. Undertakings to secure the costs should be used as an alternative to the exercise of a lien if possible. There may be circumstances where it is unreasonable to exercise a lien, for example, where the amount of the outstanding costs is small and the value or importance of the matter is very great. In any dispute over the ownership of documents you should refer to the law. Further advice about the law of lien or the ownership of documents can be found in Cordery on Solicitor or other reference books on the subject.

Client care – 2.02

11. The purpose of 2.02 is to set out the type of information that must normally be given to a client. This information must be provided in a clear and readily accessible form.

12. 2.02 is flexible about the extent of the information to be given in each individual case. Over-complex or lengthy terms of business letters may not be helpful.

13. The “level of service” to be provided should be agreed at the outset. For example, the client may want regular written reports. Alternatively, the client may want to provide initial instructions then to hear no more until an agreed point has been reached. This will affect the projected costs of the matter.

14. 2.02(2)(e) requires you to explain limitations or conditions on your acting arising from your relationship with a third party. Some arrangements with third parties, such as introducers under rule 9 (referrals of business) or fee sharers under rule 8 (fee sharing), may constrain the way in which you handle clients’ matters.

15. The constraints that such arrangements impose may fall into one of the following categories:

(a) Constraints which are proper and do not require disclosure to the client. These normally relate to service standards such as dealing with client enquiries within a specified time, the use of specified computer software, telecommunications systems, a particular advertising medium, or particular training provision.

(b) Constraints which are proper but require disclosure to the client. Some third parties may have a legitimate interest in the progress of the client’s matter and the way it is dealt with – for instance, third parties who fund a client’s matter, and insurers. Constraints that they impose, e.g. that you will not issue proceedings without the authority of the funder are proper provided they do not operate against the client’s best interests, but should be disclosed to the client.

(c) Constraints which are improper cannot be remedied by disclosing them to the client. These are constraints which impair your independence and ability to act in the client’s best interests. You cannot accept an arrangement which involves such constraints. They might include, for instance, requirements that you do not disclose information to the client to which the client is entitled, or give advice to the client which you know is contrary to the client’s best interests, or with which you disagree, or that you act towards the court in a deceitful manner or lie to a third party.

16. You must give the required information to the client as soon as possible after you have agreed to act. You must then keep the client up to date with the progress of the matter and any changes affecting the original agreement.

17. The status of the person dealing with your client must be made absolutely clear, for legal and ethical reasons. For example, a person who is not a solicitor must not be described as one, either expressly or by implication. All staff having contact with clients, including reception, switchboard and secretarial staff, should be advised accordingly.

18. All clients affected by a material alteration to the composition of the firm must be informed personally. Where the person having conduct of a matter leaves a firm, the client in question must be informed, preferably in advance, and told the name and status of the person who is to take over their matter.

19. 2.02(2)(d) refers to the person responsible for the overall supervision of a matter. Supervision requirements are dealt with in rule 5 (business management) and guidance about who can supervise matters may be found there.

20. There may be circumstances when it would be inappropriate to provide any or all of the information required by 2.02. It will be for you to justify why compliance was not appropriate in an individual matter. For example, where you are asked for ‘one-off’ advice, or where you have a long-standing client who is familiar with your firm’s terms of business and knows the status of the person dealing with the matter, this information may not need to be repeated.

However, other aspects of 2.02 must be complied with and the client must be kept up to date and informed of changes.

21. If you are an in-house solicitor or in-house REL much of 2.02 will be inappropriate when you are acting for your employer. However, it may be necessary for you to comply with aspects of 2.02 when you are acting for someone other than your employer in accordance with rule 13 (in-house practice).

22. If you receive instructions from someone other than your client, you must still give the client the information required under 2.02. There are, however, exceptions to this. For example, where your client is represented by an attorney under a power of attorney or where a receiver has been appointed because the client has lost mental capacity, the information required by 2.02 should be given to the attorney or receiver.

23. In order to provide evidence of compliance with 2.02, you should consider giving the information in writing even though this is not a requirement.

24. Where you are, in effect, your firm’s client – for example, as an executor administering a deceased’s estate or a trustee of a trust – you should consider what information, if any, should be given to interested parties. There is no requirement, for example, that beneficiaries under a will or trust should be treated as though they were clients. It may, however, be good practice to provide some information – for example, about the type of work to be carried out and approximate time scales.

Information about the costs – 2.03

25. The purpose of 2.03 is to ensure that the client is given relevant costs information and that this is clearly expressed. Information about costs must be worded in a way that is appropriate for the client. All costs information must be given in writing and regularly updated.

26. 2.03 recognises that there may be circumstances where it would be inappropriate to provide any or all of the information required. It will be for you to justify why compliance was not appropriate in an individual matter. For example, your firm may regularly do repeat work for the client on agreed terms and the client might not need the costs information repeated. However, the client should be informed, for example, of any changes in a firm’s charging rates.

27. If you are an in-house solicitor or REL, much of 2.03 will be inappropriate if you are acting for your employer.

28. This guidance does not deal with the form a bill can take, final and interim bills, when they can be delivered and when and how a firm can sue on a bill. All these matters are governed by complex legal provisions, and there are many publications that provide help to firms and clients. Advice on some aspects of costs is available from the Law Society’s Practice Advice Service.

29. You will usually be free to negotiate the costs and the method of payment with your clients. It will not normally be necessary for the client to be separately advised on the costs agreement. Different cost options may have different implications for the client – for example, where the choice is between a conditional fee agreement and an application for public funding. In those circumstances clients should be made aware of the implications of each option.

30. The rule requires you to advise the client of the circumstances in which you may be entitled to exercise a lien for unpaid costs. For more information see note 10 above.

31. Clients may be referred to you at a stage when they have already signed a contract for a funding arrangement – see also rule 9 (referrals of business). You should explain the implications of any such arrangement fully including the extent to which the charges associated with such an arrangement may be recovered from another party to the proceedings.

32. There may be some unusual arrangements, however, where it should be suggested that the client considers separate advice on what is being proposed – for example, where you are to receive shares in a new company instead of costs. See also rule 3 (conflict of interests) and 9.02(g) for details about your obligations to client who have been referred to you.

33. 2.03 does not cover all the different charging arrangements possible or the law governing them. However, it does require that the chosen option is explained as fully as possible to the client.

34. It is often impossible to tell at the outset what the overall cost will be. 2.03 allows for this and requires that you provide the client with as much information as possible at the start and that you keep the client updated. If a precise figure cannot be given at the outset, you should explain the reason to the client and agree a ceiling figure or review dates.

35. Particular information will be of relevance at particular stages of a client’s matter. You should, for example, ensure that clients understand the costs implications of any offers of settlement. Where offers of settlement are made, clients must be fully informed of the amount to be deducted in respect of costs and how this figure is calculated. You should advise clients of their rights to assessment of their own costs in such circumstances.

36. When a potential client contacts you with a view to giving you instructions you should always, when asked, try to be helpful in providing information on the likely costs of their matter.

Work under a conditional fee agreement or for a publicly funded client

37. 2.03(3) and (4) sets out additional information which must be explained to the client when work is done under a conditional fee agreement or on a publicly funded basis. Conditional fee agreements are subject to statutory requirements and all agreements must conform to these.

Payments to others

38. You must explain at the outset to your client any likely payments they will have to make. These could include court fees, search fees, experts’ fees and counsels’ fees. Where possible, you should give details of the probable costs and if this is not possible you should agree with the client to review these expenses and the need for them nearer the time they are likely to be incurred.

Complaints handling 2.04

39. The purpose of 2.04 is to encourage complaints to be properly and openly dealt with. There are huge benefits in terms of time, money and client satisfaction if complaints can be dealt with effectively at firm level.

40. The content of your firm’s complaints handling procedure is a matter for the firm, but the procedure must be in writing, clear and unambiguous. If a compliant is made to the Law Society the firm will need to be able to demonstrate compliance. Everyone in the firm will need to know about this obligation to ensure that clients know who to contact if they have a problem, the information to give a client when a complaint is made, and the importance of recording the stages of the complaint and the final outcome.

41. Your firm’s arrangements for dealing with complaints must be fair and effective. Any investigation must be handled within an agreed time-scale. Any arrangements must also comply with rule 6 (avoiding discrimination).

42. 2.04(3) prevents you charging your client for the cost of investigating a complaint. Dealing properly with complaints is an integral part of any professional business. The associated costs are part of the firm’s overheads, and complainants must not be charged separately.

43. A material breach of 2.04 may provide evidence of an inadequate professional service under section 37A of the Solicitors Act 1974.

44. 2.04 allows for situations where it may be inappropriate to give all the information required.

Commissions – 2.05

45. 2.05 mirrors the legal position, preventing a solicitor making a secret profit from the solicitor-client relationship.

46. A commission is any financial benefit you may receive as a result of placing business on your client’s behalf. Examples include payments received on the purchase of stocks and shares, the purchase or renewal of an insurance policy, and the opening of a bank account.

47. If the client consents to you keeping a commission, after being told the amount involved or given details of how it will be calculated, you are free to keep it. If the commission is materially in excess of your estimate you must tell the client and ask for consent to be confirmed. The client’s consent need not be in writing but to avoid disputes it is wise to keep a written record.

48. The commission earned may be deducted from any outstanding costs or agreed as payment instead of costs.

49. Where a client has agreed to commission being retained it can be paid into office account as soon as it is received. Where the client has not consented the money must be paid into client account. For the definition of client account see the Solicitors’ Account Rules 1998.

50. For further information about dealing with commissions, see Solicitors Financial Services (Scope) Rules 2001.

Limitation of civil liability by contract – 2.06

51. For the qualifying insurance cover currently required see the Solicitors’ Indemnity Insurance Rules.

52. 2.06 is subject to the position in law. The following points should be noted.

(a) Liability for fraud or reckless disregard of professional obligations cannot be limited.

(b) Existing legal restraints cannot be overridden. In particular, the courts will not enforce in your favour an unfair agreement with your client.

(c) Under section 60(5) of the Solicitors Act 1974 and paragraph 24 of Schedule 2 to the Administration of Justice Act 1985, a provision in a contentious business agreement that a firm shall not be liable for negligence, or shall be relieved from any responsibility which would otherwise apply is void.

(d) By section 2(2) of the Unfair Contract Terms Act 1977, a contract term which seeks to exclude liability is of no effect except insofar as it satisfies the requirement of reasonableness set out in section 11, namely that the contract term must be a fair and reasonable one having regard to the circumstances which were or ought reasonably to have been known to, or in the contemplation of, the parties when the contact was made.

(e) Section 11(4) of the Unfair Contract Terms Act 1977 provides that where a contractual term seeks to restrict liability to a specified sum of money, the question of whether the requirement of reasonableness has been satisfied must take into account the resources which the person seeking to impose it could expect to be available for the purpose of meeting the liability, and the extent to which insurance was available.

(f) The Unfair Contract Terms in Consumer Contracts Regulations 1994 (S.I. 1994 no. 3159) have a comparable effect to the Unfair Contract Terms Act as to exclusions of liability.

(g) When the retainer may be affected by foreign law, such matters may need to be considered according to the law applicable.

53. You must bring any limitation clearly to the attention of the client, and the client must understand and accept it and the agreement must be recorded in writing.

54. You should also note that if you want to limit your firm’s liability to a figure above the minimum level for qualifying insurance but within your firm’s top-up insurance cover, you will need to consider whether the top-up insurance will adequately cover a claim arising from the matter in question. For example:

(a) If a recognised body agrees with a client that its liability will not exceed £1.5 million, and its compulsory top-up insurance under the Solicitors’ Indemnity Insurance Rules is calculated on an aggregate yearly basis, there is no guarantee that the amount of the top-up cover would be sufficient where there have been multiple claims already.

(b) The insurance cover available to meet any particular claim is usually ascertained by reference to the claims year, i.e. the year in which the claim itself, or notice of circumstances which may give rise to a claim, is brought to the attention of insurers. This may mean that the top-up cover available when the contract is made may not be the same as the top-up cover available when the claim is actually brought (or notice of circumstances given).

55. As to your liability to persons who are not your clients, it may be reasonable in some circumstances for you to seek to limit or exclude altogether the liability you might otherwise incur to such persons under the principle in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] A.C. 465 (H.L.).

56. In relation to your overseas practice 15.02(3) applies to prohibit you from seeking to limit your civil liability below the minimum level of cover you would need in order to comply with 15.26 (professional indemnity).

Please select from the drop-down list for a free assessment by
a specialist injury solicitor.