A Titanic mistake: why fixed rates are bad for clients and the legal profession

“Lawyers rarely advance arguments entirely without some element of truth” said Adam Sampson, who is the Legal Ombudsman charged with policing solicitors, in a Guardian column last month. He was writing at the same time as his office published a report entitled Costs and customer service in a changing legal services market.

The article was headlined: “Lawyers beware: your clients are rebelling: For too long, lawyers have got away with arcane pricing and billing practices. Those who don’t change their ways will pay for it”. I wrote my post Et tu, Brute? The Legal Ombudsman attacks solicitors in reply, setting out exactly why I disagreed with the Ombudsman, and most of all, why I objected to what seemed to be an “anti-lawyer” tone.

I suspect I was not alone in expressing my disquiet, because Mr Sampson has adopted a completely different stance in his column for the Law Gazette this week. His audience is very much smaller and made up solely of lawyers, most of whom were unhappy with what he wrote earlier, and so in many ways I believe he has tried to appease us.

“No matter how often I tried to explain that the vast majority of lawyers are deeply committed to providing a first rate customer service …the interviewer would return to the previous formulation” said Mr Sampson of a media interview conducted at the same time as his post appeared in the Guardian. “Even the simple statement that most lawyers give good service would get lost”.

I searched in vain to find a similar sentiment in the Guardian post, which had sent me rushing for my iPad to reply. The best I could find was this:

“Of course there is some truth in their argument (lawyers rarely advance arguments entirely without some element of truth). Litigation can be very unpredictable and costs can vary hugely…”

Although, please don’t get too over excited by his acknowledgement of the situation as it certainly pertains to family lawyers, especially those who deal with financial matters, because he continues:

“But that is only true of a relatively small proportion of legal services”.

The message is repeated again in his Law Gazette column. Only this time it is politer and far more charming. We lawyers had better get used to calling our clients customers, treating them as customers and most importantly, offering them a fixed fee so they know exactly how much it is all going to cost. Then the complaints about costs are going to stop. But will they?

To persuade us he states the Ombudsman’s “role is not to punish, it is to try to help, to feedback information about what is going wrong and what lawyers might do to put it right. You pay us and I am acutely aware that the money we spend is money which you have provided…” But there is not a shadow of doubt: he is absolutely sold on the mantra of providing fixed price costs for clients. He describes the “sophistication” of customer pricing in other professional areas. He berates those firms who are “wedded to an hourly pricing structure for no other reason than it is the structure they are used to”.  And some law firms, no doubt eager for praise, are stepping into line.

I am old enough to harbour serious doubts, because I remember witnessing similar sea changes when conveyancing moved to a fixed price model.

I believe that like the sinking of the Titanic, it proved to be the most expensive disaster our profession and its insurers have ever suffered. And as a result many thousands of firms have literally been forced out of existence.

Solicitors tried to do what we now see is virtually impossible. Fixed pricing structures drove competition up, with all of course intending to continue providing an excellent service. But to me, as a mere onlooker, the disaster was foreseeable. The market was opened up, much as it is now following “Tesco Law”, and was over stimulated by panic in law firms as competition on fixed rates began. Soon lawyers were desperately offering prices that would not only see off competitors, but also lead to far lower standards in many cases.

How many negligence claims now arise each year out of conveyancing? If conveyancing was not so cutthroat, if firms charged an hourly rate for the work they do, wouldn’t standards increase rather than decline? Yet because there is a single emphasis on competition I believe standards have declined, and insurance premiums have rocketed – sending many conveyancing firms out of business because they simply cannot be afforded.

All of this has been done by lawyers in the name of the consumer: to help clarify the “mystery” of legal costs. But the actual end result costs both the consumer and the lawyers.

So, does anyone remember the days that conveyancing was not cut price? I certainly do.

These were the days when the title to land was a task carefully researched by solicitors, not just given a cursory glance. The work was not cut down to the bare minimum, and clients actually got to see their solicitor not just once (if at all), but on several occasions. Sites were visited, boundaries and party walls were inspected, items included in the sale were carefully considered and long letters of advice were written. All of this was standard when I was training to become a solicitor and cut my teeth as a novice conveyancer. Do those same standards still exist? Even though conveyancing has become streamlined, surely the increase in mortgage fraud and the cost of insurance premiums for domestic conveyancing speaks volumes?

Nevertheless, the Ombudsman says in the Law Gazette that: “more commercially astute firms are moving to a more predictable price model…there will always be limitations as to how far that is possible”.

But what is “commercially astute” about “a more predictable price model” than what we do already? Costs estimates are intended to be a realistic guide of costs, and can include indications of pricing from stage-to-stage. We can’t forsee the future, or predict the unpredictable, and therefore with the best will in the world costs estimates can and do increase.

A recent example occurred with one of my own cases. I gave a costs estimate to a client on the basis that a certain path would be followed. The client then made an about turn and the costs estimate is altering accordingly. How can a fee earner predict all the twists and turns of a case at the outset, when it hasn’t yet got going? It’s unrealistic to expect absolute certainty.

I have the strongest doubts about the extent to which a more predictable pricing model will differ from what we do already, other than to cause complaints for a firm which does offer fixed price work upon the requirement for more to be completed.

Provision of family law services currently isn’t a major risk for legal insurance providers and therefore indemnity insurance premiums are low. Few negligence claims arise out of family law cases, for the obvious reason that sufficient time is spent on dealing with the work. If fixed prices begin, it is an unassailable fact that the time spent on case work will be reduced, and negligence claims will happen. And as a result insurance premiums will rocket, just as they have in conveyancing – putting law firms out of business and reducing the choice available to consumers.

It is also wrong to use legally aided cases as a reference point. The work done on legal aid is limited, and therefore can it always be argued that a legally aided client has had the best service?

I propose a different approach, one that I mentioned in the comments of my previous post on this topic. It is for a clearly defined “consumer’s charter” to be developed that documents the obligations both clients and solicitors have to one another. If the Ombudsman wants a more commercial approach then clients need to understand this shift. They will no longer be able to wait months or years to complain, simply ignoring their bills and storing grievances until the case is over. It’s a two-way street. Consumers must act swiftly in every other area to rectify perceived wrongs. Yet in this area, they are cosseted.

Which brings me to what I believe are the root causes of the huge number of costs-related complaints that the Ombudsman has highlighted as a major driver for change. I would suggest that the ability for erstwhile clients to later complain free of charge (to a service we fund), coupled with the current economic climate, is behind the upsurge. For as I’ve asked before: who wouldn’t complain, if they stand a chance to save or be repaid money at no risk whatsoever to themselves?  If we are to move forwards in a meaningful way this imbalance must be urgently redressed, and a culture that suggests it is almost always the lawyer’s fault needs to change.

So my firm will not be taking a metaphorical trip on the Titanic, which was you will recall outwardly modern and sophisticated, but in fact ill-equipped for the challenges that lay ahead. We are not sailing blindly towards a cut-price fixed fees iceberg, because I am certain disaster will ensue for all the firms foolish enough to follow that route. Much like the captain of the Titanic, the Ombudsman seems to have overlooked the huge icy peril that so gravely damaged the conveyancing profession.

We will however continue to try and give the fairest estimates we can, and strive towards the highest standards of client care, without having to make any downward adjustments in terms of staff or the services we offer our clients. And we will do this regardless of the pressure applied by those who overlook the lessons of history.

Marilyn Stowe

The senior partner at Stowe Family Law, Marilyn Stowe is one of Britain’s best known divorce lawyers with clients throughout the country, in Europe, the Far East and the USA.

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5 comments

Zack - April 12, 2012 at 12:59pm

Hi Marilyn,
Great article, really thought provoking piece! I have found from personal experiences that fixed fee conveyancing is rarely straightforward, and invariably further costs, sometimes ‘hidden’ often arise, leading to ill feeling between client and firm. As you suggested an estimate detailing all possible fees is probably the fairest way, there maybe needs to be some sort of industry or de facto standard established?

Marilyn Stowe - April 12, 2012 at 1:03pm

Zack
Thanks.
Yes a consumer standard for estimates would be a great way forward.
Marilyn

Marilyn Stowe - April 14, 2012 at 8:24am

Lynn Bastow, a family law solicitor left this comment on my other post Et tu Brute, and it’s well worth copying for this post too;-

“I thought the Legal Ombudsman’s role was to investigate allegations of poor service not make it a mission to force down the cost of legal services and admonish solicitors for not supplying a fixed fee service? 

We get daily requests for free legal advice, via email and telephone.  We do not advertise free legal advice so why is there a pervasive expectation of such?  Sometimes we are abused for refusing to give free legal advice, and I hear that the Legal Ombudsman wants to open their door to non-clients, and extend the time to make a complaint to 6 years.  They will need to expand and perhaps can solve the country’s employment problem as well.”

Well said. Granted errors do occur but many people are sadly out there on the make and it’s made easier for them by the way our image is so publicly and unfairly tarnished. Whatever may be written in the Law Gazette, it is too late, and hardly reaches the same readership as the Guardian.
Marilyn

Rachel - April 14, 2012 at 11:13am

To request a fixed rate at the outset of a divorce is clearly unrealistic. The case can so easily become adversarial because of the emotions involved and positions become entrenched leading to increased legal costs which could not have been foreseen.
However, I do believe that the system of assessing the costs by the solicitor could be dealt with using less military precision. For instance, I have been charged the same amount for a long, informative letter giving legal advice as a brief letter which tells me nothing. Also, a phone call which the solicitor knows is not being productive but allows it to proceed, without reminding the caller that he/she is being charged at the unit rate. Once I was cut off mid- call and I had to ring again. I was subsequently charged for 2 calls at the unit cost of £25 per call even though my query was simply to ask if a particular document was on the file! It would create a much better feeling of goodwill if situations like this could be avoided, especially if the client has already paid thousands of pounds for services rendered by the solicitor with which they have no problem.
I realise these are small charges in the overall scheme of things but they do result in Ill feeling. They might be removed from the bill when queried but this does not help the feeling of being overcharged from souring the relationship with one’s solicitor.
When I availed myself of the public access scheme for the final hearing of my case, I was quoted a fixed fee by my barrister for 2 days in court. After the hearing things became unexpectedly complicated when the other side formally questioned the judgement and my barrister was required to respond on my behalf. Then non compliance with the order by the respondent meant I had to seek further advice from my counsel which he continued to give, all as part of his fixed fee.
He may have regretted taking me on under the access scheme, I don’t know, but he was courteous and helpful throughout and I felt safe in the knowledge that I could get to the end of the process without the worry of an exorbitant bill at the end of it!
My point is, if solicitors could relax their approach to the billing system and be less stringent about charging for the little things, maybe the client would be less inclined to become disgruntled when the dreaded bill comes in!

Marilyn Stowe - April 14, 2012 at 2:52pm

Hi Rachel
Thanks very much for your comments.
You make some good points and I agree with what you say about niggles on bills. 
Our lawyers don’t prepare their own bills. They do their own time recording on the accounts ledger, and many of them do at that point, take a view on how much time they will actually time record so even though the file may show more time spent, letters and telephone calls, prep time and so on, the time recording ledger is lower.
We employ University graduates to head our billing team. They are responsible for judging how much time should then be billed to a client by reference to the file in front of them and the fee earner’s time recording precisely for the reason you point out.
 If they think an item should not be billed, it won’t. They will then bill the client overall and attach a breakdown which they will happily explain in detail face to face and all free of charge. 
Fee earners in our firm willingly hand over billing and credit control to the more independent admin team. It’s a system that works very well although I appreciate we have the resources to do it. Not every firm does, and it can be very embarrassing and even upsetting for a fee earner to handle a billing/ debt collection issue personally. Our admin team has the authority to make judgement calls on all bills and client care is always uppermost in their minds.
As for your barrister, having agreed his fixed fee on your case, he was completely stuck. How happy he was about it, no doubt carrying his personal overdraft as barristers often do, maybe a wife and kids to support, and devoting his fee earning time to non remunerative work I don’t know. I do a great deal of voluntary pro bono work:- the work I do on this blog alone, before work, at lunchtimes and late into the evening, takes around a hundred hours each month- and when my firm was much smaller, it wasn’t possible.
Overall no one can possibly run a successful and viable business on unpredictable fixed fees without it causing economic loss and cutting corners. Hence the conveyancing disaster for so many firms which is the outcome of millions of fixed quotes, good intentions gone wrong and poor business acumen.
As your case demonstrates, fixed fees are manifestly not suitable for the conduct of family law litigation.
Thanks again,
Marilyn

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