Fees, Costs, Trust Money and Financial Obligations
Fees and costs disclosure
Solicitors must disclose costs fairly and transparently, provide a costs agreement where required, and avoid charging excessive or unreasonable fees. Disclosure should occur before or at the time of engagement and be updated if circumstances change. The client must be told of the likely costs, the basis of calculation, and any billing intervals.
Trust money
Trust money is money held for a client in connection with the provision of legal services. It must be held in a dedicated trust account, kept separate from the solicitor's own money, recorded accurately, and reconciled regularly. Trust money must not be used for the solicitor's own purposes. Withdrawals must be authorised and documented. A solicitor must never mix trust money with office money (no "borrowing" from trust to cover cash flow).
Billing and recovery
A solicitor must not charge for work not done, must render accounts accurately, and must not commence proceedings to recover costs without proper basis. Costs agreements that are unfair or not disclosed may be unenforceable.
Traps
- The "cash flow" trap: using trust funds to cover the firm's expenses is a serious breach, even if repaid.
- The "estimate" trap: an estimate that is later exceeded without disclosure can amount to a breach.
- The "small amount" trap: even small trust irregularities are disciplinary matters.
- The "contingency" trap: contingency fees are restricted or prohibited in many jurisdictions; know the local rule.
Rule of thumb
Trust money is never the solicitor's money. If it is not clearly the firm's own funds, it belongs in trust and must be accounted for.