In light of the Court of Appeal decision in Minkin v Landsberg, solicitors can now offer ‘unbundled’ services without being held liable for matters beyond those in their client retainer. While widely welcomed by the profession, there are still risks involved in offering unbundling services and informally providing free legal advice that can bring you in conflict with the SRA Code of Conduct. Chris Cann explains.
To what extent do you think the Minkin v Landsberg judgment should be welcomed by solicitors?
I believe that most firms wanting to expand and compete will have to embrace ‘unbundling’ to some extent. The judgment has legitimised the practice, and given ‘safe harbour’ advice on how firms can offer it, while reducing the risks associated with having only part of the story relating to the client’s case.
Historically, most lawyers would, quite rightly, have wanted to delve into the history and background of the case, review documents and correspondence, and fully acquaint themselves with as much detail as they could obtain before offering advice. But this is expensive, which flies in the face of the whole purpose of unbundling to offer legal services to those clients who can’t or won’t pay the full cost of those services.
Until this judgment, those firms that had been formally offering an unbundled legal service were doing so at some risk to their indemnity insurance policy, because they simply did not know what view the courts would take of their cost-cutting processes.
Even those firms that have not yet formalised their unbundled service offering should welcome Minkin as a wake-up call. They can now safely articulate the price and terms of their offering. If they make that clear to the client, they should be safe from any complaint that they did not ask all of the questions they could and should have done.
What are the potential risks still attached to offering unbundling services? How can you reduce them?
There are several risks involved if you do not take the time to properly plan and define exactly what services you are offering, and what is being left on the client’s shoulders.
You might lose money
This is a less obvious risk. So your firm has marketed a service that has proved popular at the price advertised. However, if you haven’t properly quantified the maximum amount of work your lawyers are expected to undertake on any unbundled service, it leaves the possibility that the lawyers will revert to type and spend far more time on a job than intended, checking everything over carefully to protect their backs. Make sure you properly involve and train lawyers on what corners are safe to cut, and what proportion of their backsides can remain exposed.
Performance is not properly measured and monitored
Unbundled services are still new to lawyers, and there are not that many benchmarks to measure success against. If your firm’s senior management introduce unbundling services, but then take their eyes off the ball, there is a huge risk that costs will spiral up unchecked. Introduce the right metrics with the new processes, and ensure they are regularly reviewed in the early days.
You fail to define your retainer properly, and/or fail to communicate it effectively to clients
This is the largest risk of all. As Lady Justice King said in her Minkin judgment, for firms to obtain full protection they must draft their ‘supporting client care letters and formal written retainers with considerable care to reflect the client’s specific instructions’. I would argue that it is necessary to reflect the client’s instructions and also to explain in writing exactly you are willing to undertake at a given price, and what you will not be undertaking. If you are going to do this properly, you must have cast-iron processes and precedents for your lawyers to use.
What client care obligations in the SRA Handbook are engaged when offering unbundling?
I would say that exactly the same obligations are engaged in unbundling as they are in full-service offerings. The Court of Appeal might let lawyers get away with making less enquiries and so on, but the SRA is not going to let you get away with any less client care as such.
Chapter 1 of the Code of Conduct is going to apply regardless. From treating the client fairly (O1.1), to being open about your mistakes (O1.16), lawyers are going to be expected to comply. This is the point I am making about this judgment being a wake-up call. Those lawyers who have ‘general’ and ‘miscellaneous’ files in their cabinets in which they stuff the odd handwritten note where they gave a piece of free advice to a client acting in person, are storing up real problems for themselves. They are at risk of negligence actions, and are failing in their client care duties under the Code of Conduct. Even though the one-off meeting is soon forgotten by the lawyer, it remains fresh in the memory of the client, and they are undoubtedly a client who deserves and expects exactly the same care as one for whom a formal file is opened.
What are the dangers of giving free advice?
In the absence of a new, fully planned-out unbundled service offering, sponsored by the senior management of the firm, I can fully understand the temptations on a lawyer in private practice. I was that lawyer at one time, and I did have general and miscellaneous files. It was many years ago and long before the Code of Conduct, but the behaviour was just as risky.
The problem is that the administrative burden on lawyers and the time involved in opening a new file in most firms is so large that they will do anything to avoid it. I’m sure that if there was a way of magically clicking one’s fingers to create a new file, there would be a lot more bills of £25 plus VAT, and a lot less free advice going on! Most clients would be quite happy to pay £25 for a bit of valuable face-to-face advice, but it’s not difficult to understand why a lawyer would say ‘no don’t worry, I won’t charge you’, because they know it would cost them far more than £25 in opportunity cost to open the file required in order to raise the invoice!
But if a file isn’t opened for this free advice, how do they evidence to the SRA that they have complied with the Code of Conduct, and how do they provide support to their indemnity insurers when that client comes back in a few months’ time complaining that they lost their case because of advice that their lawyer did or did not give them?
Lady Justice King wants to see written retainers drafted with considerable care, but without the formal structure offered by the traditional cardboard file, what is there to prompt a lawyer to sit down and compose such a retainer? If the lawyer or their firm has not sat down and worked out a plan for doing pro bono and unbundled work for low-income clients, what are they to do?
In light of Minkin, my advice is that lawyers do not offer free advice at all until they have worked out a process to ensure that the client receives minimum terms of business and a thoughtfully prepared retainer.
Do you have any best practice advice for offering unbundling?
We must distinguish between the offering of an unbundled legal service, and the provision of free advice. Defining a piece of legal advice as an ‘unbundled offering’ gives it an air of formality that hints at some necessary organisation and planning.
Those firms that have actually thought enough about what they are offering to be able to call it an ‘unbundled offer’ have probably done most of the best practice work necessary to provide a profitable and attractive service. Each area of work will have different components that can be divided into those that can be left to the client to perform, and those that need lawyer input. By examining, defining and pricing these elements, and including them in some sort of descriptive retainer, you will have gone a long way towards satisfying Lady Justice King’s requirements for best practice.
Once you have done this, it will be relatively easy to assign an estimated average time / cost to each component. This way, you have built up a priced ‘menu’ of services that a client can pick and choose from. Alternatively, you could offer a package of components to make marketing them easier. It makes it much easier to draft terms of business and retainers that properly restrict and define the work that you have committed to.
The area I really worry about is free advice. It hints at ad hoc legal work that is not properly defined or understood by the firm. Given that it is probably going to be impossible to stop, I think the best that firms can do is to bring it out into the open and work out a compromise involving the lawyers, the compliance officers, the accounts team and any other stakeholders in the firm.
Chris’s top tips on giving free advice
- An individual file should be opened for any client who has been given free advice, and at the very least a postal and email address should be obtained. If the client found the advice valuable, why wouldn’t you add them to your marketing distribution lists?
- I think that most of the usual money laundering and risk management due diligence checks could probably be dispensed with in advice-only files, thereby cutting down on a lot of admin work. There would be no need to obtain ID, and it would probably too late to do a conflict check because the advice has already been given by the time that anyone can access your computer conflict-checker. Rely on the lawyer’s own instincts, and office policies, to spot high-risk areas of work / advice.
- Obtain the bare minimum amount of information needed from the client to open the file on your practice management system. Carefully analyse each element of information required to open a more traditional client file, and find out what could be missed out in these cases.
- Allow handwritten attendance notes if that is what the lawyer prefers, or encourage shortened dictated notes. But the notes must define the information and documents the lawyer had access to in support of their advice.
- Prepare a short-form, advice-only retainer precedent letter for each work type where free advice is going to be given. This should be sent by the lawyer with your firm’s full standard terms of business. Or you could take a bit longer and pare it down to a bare necessary minimum. The letter must clearly define what the lawyer has agreed to do (usually, provide a piece of one-off, advice-only work based on the information and documents referred to in the attendance note).
- Don’t require lawyers to seek a signed copy of the retainer letter or terms of business from the client. Presume delivery.
- Analyse the file closing / archiving process in the same way as you did when the file was opened, and pare it down to a necessary minimum. Ensure the files are closed and archived as quickly as possible.
- Once you have all of that in place and the lawyers have bought in to what you are doing, suggest that instead of offering free advice, they offer a fixed-price interview (with the client bringing the cash with them), so that some of the admin costs can be recovered. Prepare a short-form standard invoice precedent that is easy to produce, and analyse the accounts procedures surrounding the issuing of invoices to pare them down to the minimum necessary.