I thank the committee for inviting us to appear to discuss the issue of legal costs. I am joined by my colleague, Mr. Ultan Ryan, secretary to the authority. The invitation letter issued by the committee suggested that witnesses may wish to focus on issues they believe are most relevant to their areas of expertise. Of the areas of examination listed by the committee, those most relevant to the role of the LSRA relate to greater transparency on legal costs in Ireland and increased competition within the legal sector which may reduce costs.
It may be helpful to outline the relevant statutory objectives and functions of the LSRA that frame its mandate, highlighting those directly relevant to the matter at hand and the concerns of the committee. I will provide an update on the status of the LSRA in fulfilling its broad statutory remit with emphasis on the areas of activity that might have most impact in the areas of cost and competition. I will look ahead to the new year and some elements of the future work programme of the LSRA relevant to the costs of legal services in the State.
The LSRA is the new independent regulator for the provision of legal services by legal practitioners. Section 13(4) of the Legal Services Regulation Act 2015 sets out the six statutory objectives of the LSRA which are, in effect, our operating principles. These are to protect and promote the public interest, support the proper and effective administration of justice, protect and promote the interests of consumers relating to the provision of legal services, promote competition in the provision of legal services in the State, encourage an independent, strong and effective legal profession and promote and maintain adherence to the professional principles of legal practitioners as specified in the Act.
The committee will note that while a reduction in legal costs is not explicitly mentioned, we are tasked with protecting the public interest, the interests of consumers of legal services and with promoting competition. The Act intends that these principles guide the authority in all of the work it undertakes. The authority’s 11 functions are set out under section 13 of the Act, and in the context of today two of those functions are particularly relevant. I will not read all of section 13 into the record. It is included in our submission. I will highlight subsections (e) and (g) which relate, respectively, to receiving and investigating complaints and to promoting public awareness and disseminating information to the public in respect of legal services, including the cost of such services. The committee will note that the remit of the LSRA is broad.
The membership of the authority is comprised of 11 members who are appointed by the Government following nomination by a number of bodies. The Government appointments to the authority are approved by resolutions of both Houses of the Oireachtas. Of the Authority’s 11 members, six are lay members including a lay chairperson, Dr. Don Thornhill, and five are non-laypersons. The six lay members are nominated by the following bodies: the Citizens Information Board; the Higher Education Authority; the Competition and Consumer Protection Commission; the Irish Human Rights and Equality Commission; the Institute of Legal Costs Accountants; and the Consumers’ Association of Ireland. Of the five non-lay members one is nominated by the Bar Council-Bar of Ireland, one is a solicitor nominated by the Legal Aid Board, one member is nominated by the Honorable Society of King’s Inns and two are nominated by the Law Society. Each member of the authority is statutorily required to act on a part-time basis. The authority is required by law to be independent in the performance of its functions. Authority members are required to protect and promote the public interest. They are nominees and not representatives of the nominating bodies. The authority has met on 19 occasions since its establishment.
The executive function of the authority is provided by myself as the CEO and by the staff of the Legal Services Regulatory Authority. As I mentioned earlier, the statutory remit of the LSRA is broad. In terms of areas of our work that relate most directly to legal costs, there are three key areas that I will focus on today, namely, legal costs transparency; promoting competition; and complaints about costs. On legal costs transparency, from 7 October 2019 under sections 150 and 152 of the 2015 Act, legal practitioners are required to provide specific and detailed notices on costs to their clients. Under the new provisions, when solicitors and barristers first receive instructions from a client they must provide the client with a notice written in clear and understandable language setting out the legal costs that will be incurred in the matter concerned or, if this is not reasonably practicable, the basis on which the legal costs are to be calculated. Section 150 sets out in detail the information that must be included in the notice. This includes the costs incurred up to the date of the notice; the costs that are certain to be incurred and the costs that are likely to be incurred; the amount of VAT to be charged; information as to the likely legal and financial consequences of the client’s withdrawal from the litigation and its discontinuance; and information as to the circumstances in which the client would be likely to be required to pay the costs of one or more other parties to the litigation and information as to the circumstances in which it would be likely that the costs of the legal practitioner would not be fully recoverable from other parties to the litigation. There is also an obligation under the Act for the legal practitioner to provide a further notice to the client where they become aware of any factor that would make the legal costs likely to be incurred significantly greater than those disclosed or indicated in the first notice. This means that the process of notification of costs is an ongoing one and not just an initial once-off notification. Legal practitioners are also now required to provide, as soon as practicable after the conclusion of legal services, a signed bill of costs that meets the requirements of the Act including an itemised statement of the amounts charged in respect of the legal services. The provisions of sections 150 and 152 are an important step in the promotion of transparency and consistency in how legal services are costed and billed. These new requirements on legal practitioners will allow consumers of legal services to make more informed decisions in respect of the legal services which they have sought. With updated notices being provided to them, they will have the opportunity to review their own choices, priorities and decisions as to how they wish to proceed.
The LSRA expects that it will be required in due course to consider complaints where it is alleged that section 150 notices were not provided, were not clear or were inadequate. However, these notices should greatly improve communication and transparency on cost between practitioner and client, which should in turn have a positive impact in respect of volumes of such complaints. Section 150 and the requirements of this part of the Act go a long way towards providing a statutory framework for the communication of legal costs. There is now a clear obligation on legal practitioners to be transparent, consistent and thorough in communicating with their clients. The LSRA will consider the failure to provide a section 150 notice or an accurate notice when considering complaints of excessive costs and the new Legal Costs Adjudicator will also consider the notices when adjudicating on bills of costs. In fact, a failure to properly comply with the requirement to provide a notice of costs can be taken into account to disallow costs in an adjudication. The new Office of the Legal Costs Adjudicator is established under part 10 of the 2015 Act. The Legal Costs Adjudicator replaces the Taxing Masters’ Office and is wholly independent and separate from the LSRA. The new office will also maintain a register of determinations in relation to applications for the adjudication of legal costs, which adds a new layer of transparency to legal costs.
On promoting competition, the LSRA has conducted public consultations, research and reports on a series of key subjects as required under the Legal Services Regulation Act. Three of the reports submitted to the Minister for Justice and Equality were undertaken in line with the statutory objective of promoting competition in the provision of legal services. These reports examine or relate to the introduction of legal partnerships in the State, multidisciplinary practices and the consideration of whether barristers should be permitted to hold clients’ money or to receive direct instructions in contentious matters.
On limited liability partnerships, LLPs, legal partnerships and multidisciplinary practices, in November 2019 the LSRA introduced the framework that will allow existing solicitor partnerships to apply to the LSRA for authorisation to operate as limited liability partnerships. This is intended to put Ireland on a par with other jurisdictions that have operated LLPs for a number of years but also to have the potential to increase competition in the legal services market, reduce professional indemnity insurance costs for LLPs and to consequently lower legal costs. Following on from the introduction of LLPs, the Minister for Justice and Equality will be introducing the necessary legislation to allow the LSRA to introduce the framework for legal partnerships as a new business model for legal service delivery in 2020. Once legal partnerships have been introduced, the LSRA will consider whether multidisciplinary practices would be a viable and positive model for legal services delivery.
On complaints about costs, on 7 October 2019 the LSRA began receiving and investigating complaints relating to solicitors and barristers. Since that date, the LSRA has received 522 complaints or queries and more than 847 phone calls and e-mails requesting information or complaint forms. We have been busy. It was anticipated that there would be a spike in complaints at the beginning of operations under this function as a result of persons waiting for the LSRA to open its service who might otherwise have made their complaints through the previous framework at the representative bodies. It should be noted that the LSRA in determining admissibility of complaints cannot admit a complaint to the process where the same or substantially the same complaint has been previously determined by the High Court or by the Law Society or any of its committees or tribunals. Similar restrictions on admissibility apply in relation to matters which have been the subject of civil or criminal proceedings. The impact of this is of particular significance at this early stage of the operation of our complaints function as part of the transition to the new regime. The issue of the cost of legal services is directly relevant to complaints in a number of key ways. There are three grounds for complaint, namely, that the legal services provided were of an inadequate standard; that the amount of costs sought by the solicitor or barrister were excessive; and that the legal practitioner performed an act or omission which amounts to misconduct under the Act. There is a degree of overlap between the three grounds for complaints when it comes to costs. This is because a complaint about excessive costs can actually become a complaint about misconduct where the amount of costs sought is grossly excessive. Under the definition of misconduct for legal practitioners in the 2015 Act it is misconduct to seek an amount of costs in respect of the provision of legal services that is grossly excessive. It is also misconduct for a legal practitioner to be involved in an act or omission which involves fraud or dishonesty, is connected with the provision of legal services which are inadequate to a substantial degree or which is likely to bring the profession into disrepute. Focusing on non-misconduct cases for a moment, in non-misconduct complaints where it is alleged that the amount of costs sought by the legal practitioner in respect of legal services provided to the client was or is excessive, the complainant has three years either from the issuing of the bill of costs or from when the complainant knew or ought reasonably to have known that the amount of costs sought was excessive, to bring the complaint to the LSRA. If a complaint of excessive costs is made to the LSRA and meets the admissibility criteria under the Act that would allow the LSRA to deal with the complaint, the LSRA must first attempt to informally resolve or mediate the complaint between the legal practitioner and the complainant. We are hopeful, based on our experience so far from 7 October, that both legal practitioners and complainants will engage in this process and allow for an early resolution of issues of cost and inadequate service. However, where the client or the legal practitioner do not accept the invitation to informally resolve the complaint of excessive costs, where attempts to resolve are not successful or where the LSRA forms the view that a resolution or agreement is unlikely, the LSRA has the power, having first sought the views of the parties, to determine the complaint. This means that the LSRA can direct that the costs were, in fact, not excessive or where it concludes that the costs sought were excessive can direct the legal practitioner to refund without delay, either wholly or in part as directed, any amount already paid by or on behalf of the client in respect of the practitioner’s costs in connection with the bill of costs or to waive, whether wholly or in part, the right to recover those costs. Any direction of the LSRA can be appealed by the client or the legal practitioner to an independent review committee. The decisions of the review committee ultimately can be appealed to the High Court.
Dealing with misconduct complaints under the Act that relate to costs where it is alleged that the amount of costs sought by a legal practitioner was grossly excessive, these will be considered and assessed for admissibility and the legal practitioner will be given the opportunity to address the allegations. If the complaint is found to be an admissible complaint, it will be forwarded by the authority to an independent complaints committee.
The complaints committee is tasked with considering and investigating misconduct complaints, and has a range of sanctions at its disposal, including directing that a legal practitioner participate in a professional competence scheme, that he or she refund to the client some or all of the fees paid, or that he or she pay compensation to the client of a sum set in the Act as not exceeding €5,000.
Should the complaints committee be of the view that the matter is so serious as to warrant it, it can refer the matter for the consideration of the legal practitioners disciplinary tribunal, LPDT. The tribunal is independent of the LSRA and is in the process of being established through the Department of Justice and Equality. That tribunal, the LPDT, will consider more serious matters of misconduct and has a wider range of sanctions from advice, admonishment and censure, a direction that the legal practitioner pay up to €15,000 restitution to the client, to a direction that a specified condition or restriction be placed on the legal practitioner's practice. The tribunal can also apply to the High Court for further measures including that a legal practitioner be prohibited from practice.
Under section 73 of the 2015 Act, the LSRA is required to report on the operation of its complaint function every six months. The first report is due before 7 April 2020. The Act requires that figures on the nature and type of complaints received be included in the report, and the LSRA intends to identify and outline where trends in complaints have emerged.
Even in the relatively short time that has passed since 7 October 2019, complaint themes are emerging. The one feature that seems to cut across almost all of them is, perhaps unsurprisingly, communication. Where a legal practitioner fails to explain adequately to a client the costs of legal proceedings or services, the timeline it may take to deliver legal services, or the risk involved in pursuing certain costs of legal action, complaints will naturally follow.
I mention briefly the roll of practising barristers, which the LSRA established in 2018. The roll is a tool by which members of the public can be assured that the barrister to whom they may turn for legal advice is lawfully entitled to provide legal services. It is published on the LSRA's website.
We have also issued professional indemnity insurance regulations for barristers. This means that, for the first time, practising barristers outside of the Bar of Ireland are required to have minimum levels of professional indemnity insurance that provide an important protection for consumers.
I draw the committee's attention to a number of other initiatives under the Act that the LSRA will be undertaking in 2020. We will be issuing advertising regulations in the new year that will govern the advertising of legal services. We will also issue regulations that will allow us to enhance the roll of practising barristers to include information on barristers' areas of practice and specialism.
We were disappointed not to be able to introduce legal partnerships alongside limited liability partnerships as a new model of legal service delivery in 2019, but there is a need for a legislative amendment before this can be done. We have been assured of the Minister for Justice and Equality's support for that amendment. This will allow barrister-barrister partnerships and solicitor-barrister partnerships to be formed for the first time and, although take-up may be modest to begin with, the new model has the potential to reduce costs for consumers. Once we have delivered legal partnerships, we have committed to revisiting the issue of multidisciplinary practices under the 2015 Act.
Before 30 April 2020, the authority is required to report for the first time, and thereafter annually, on the admissions policies of the legal profession and to assess whether the number of persons admitted to practise as barristers and solicitors in 2019 was consistent with the public interest in ensuring the availability of legal services at a reasonable cost. The LSRA is also required to consult publicly and to report to the Minister before 1 October 2020 on whether the profession of solicitor and barrister should be unified. Finally, and this is not an exhaustive list, the LSRA in 2020 will submit a further report to the Minister, following on from our initial report of September 2018, on the education and training of legal practitioners with recommendations as to potential reforms. All of these reports have, at the very least, the potential to lead to reforms that could increase competition in the delivery of legal services and could have a positive impact on the costs of those services.
My colleague and I look forward to engaging with the Chairperson and the members of the committee and to responding to any issues and questions that may arise.