Costs lawyers say Legal Ombudsman is wrong venue for solicitor-client fee disputes

Specialist costs lawyers have urged the Civil Justice Council to rethink its plan to hand lower-value solicitor-client costs disputes to the Legal Ombudsman, arguing that an online pre-action protocol run by a panel of experts would resolve complaints faster, more cheaply and more accurately.

The Association of Costs Lawyers (ACL) said the current proposals for reforming Part III of the Solicitors Act 1974 risk creating a disconnect between how solicitor-client bills are assessed and how costs are dealt with in litigation. In its response to the CJC consultation, the ACL warned that an overarching principle that solicitor charges must be "fair and reasonable" could unintentionally widen the gap between inter partes and solicitor-client assessments.

Why the LeO may not be the right forum

The Civil Justice Council has recommended that all solicitor-client costs disputes worth up to £50,000 should be dealt with by the Legal Ombudsman. The idea is to create a more accessible, proportionate route for clients who believe they have been overcharged.

But the ACL argues that the LeO "lacks the requisite expertise and capacity to deal with costs assessments". Costs disputes are not general consumer complaints: they turn on detailed questions of retainer construction, hourly rates, disbursements, VAT and the reasonableness of work done. The ACL fears that moving this volume of technical work to the ombudsman could slow down outcomes and increase costs for everyone involved.

A further concern is data. The ACL told the CJC that there is a "fundamental lack of data" on the volume and nature of solicitor-client assessments, making it hard to design a new statutory regime without understanding the problem it is meant to solve.

The proposed online portal

Instead of the LeO, the ACL wants a dedicated online portal modelled on the Official Injury Claim portal. Parties would exchange information and make settlement offers through the platform. If no agreement is reached, a qualified lawyer from a panel of costs lawyers, solicitors, barristers and chartered legal executives would make a preliminary determination.

Complex or high-value cases could still be referred to the court. The ACL suggests that unhappy parties should be able to challenge a panel determination through the existing provisional assessment regime, which allows for a determination on paper and a possible oral hearing for cases up to £75,000. If the court did not change the panel's decision by at least 20%, the party that started the challenge would bear the costs.

The ACL's working group believes many solicitor-client disputes arise from a simple lack of information. Clients sometimes claim they were never given a fee estimate or a copy of the retainer, only for the position to become clear once proceedings are issued and disclosure is ordered. By then, both sides have spent time and money that could have been avoided.

A pre-action protocol requiring early transparency and disclosure — for example, a standard questionnaire or copies of key documents — could resolve a large number of complaints before they ever reach a formal assessment.

'Fair and reasonable' principle sparks concern

The CJC's proposed "overarching principle" that fees be fair and reasonable, judged on an objective basis, has drawn strong criticism from the ACL. The association said the wording "significantly departs from the scope of the current Act and is contrary to orthodox jurisprudence".

The reasonableness test in solicitor-client costs has a subjective element: what was agreed between the solicitor and the client matters. If that is replaced with a purely objective standard, the ACL warns there could be a "disconnect" between inter partes and solicitor-client assessments.

That matters in practice because the two are often linked. A valid retainer between solicitor and client is needed to recover costs from the other side under the indemnity principle. If the amount recovered from the opponent and the amount chargeable to the client do not match, the client can be left with a shortfall. A regime that treats solicitor-client charges as a standalone consumer issue risks ignoring that relationship.

The ACL also warned that extending the fair-and-reasonable principle to contractual terms could increase the volume of assessments. At present, hourly rates are rarely challenged because they are usually part of the agreed contract. If clients can reopen contractual terms more easily, more disputes are likely to follow.

What the ACL wants from the SRA code of conduct

The ACL's response sets out proposed changes to the SRA Code of Conduct, which it says "barely mentions costs". Clearer professional conduct rules on fee transparency, estimates and billing could prevent many disputes from arising in the first place.

The association also warned that if the CJC proceeds with mandatory alternative dispute resolution for costs disputes worth more than £50,000, the "significant imbalance" between legally represented solicitors and often unrepresented lay clients must be addressed. Otherwise, the mediator risks becoming "simply a referee in an unfair fight".

Amy Dunkley, an ACL council member who sits on the policy committee that drafted the response, said the Solicitors Act "needs updating" but that the CJC should be cautious about repealing large sections of statute that consolidate 200 years of case law. "Abolishing large sections could render agreements unlawful as an unintended consequence," she said. "As experts in the field, we stand ready to assist."

What happens next

The Legal Ombudsman chief executive, Phil Cain, said in June that the organisation was open to a discussion about taking on costs disputes but was not in a position to do so for some time. That leaves a gap between the CJC's ambitions and the practical capacity to deliver them.

The ACL believes its portal-and-panel model could be developed now, without waiting for the LeO to build new expertise from scratch. Whether the CJC adopts that approach will depend on the final shape of the consultation response, expected later this year.

For law firms, the immediate message is clear: improve fee transparency and retainer documentation now, because whatever regime emerges, early disclosure is likely to be at its heart.