Plans form part of Solicitors Act overhaul to modernise solicitor-client costs disputes
Costs disputes between solicitors and their clients worth up to £50,000 should be removed from the courts and handled by the Legal Ombudsman, under proposals by the Civil Justice Council to overhaul the legislation underpinning solicitor-client billing.
The proposals form part of a consultation issued yesterday on reforming Part III of the Solicitors Act 1974, which would be replaced by a simplified statutory code aligned with modern regulatory practice.
The working party also signalled a move away from many of the technical features that currently govern costs disputes, including the distinction between contentious and non-contentious business and detailed requirements around the form and content of bills. In their place, greater reliance would be placed on professional conduct rules and regulatory enforcement.
The need for reform was underlined by Mr Justice Adam Johnson, who described the current regime as “seriously out of date”, with elements tracing back to the Attorneys and Solicitors Act 1729.
He said: “The regime as a whole reflects the concerns of a time when there was no developed system of regulation for solicitors. It is complex, formalistic and outmoded.
“Moreover, its complexities provide perverse incentives for costly litigation about costs, which have been criticised in a number of modern authorities (most notably Belsner).
“The resultant inefficiencies are wasteful of court time and resources and damaging to consumers and businesses alike.
“We suggest that the time has come for introduction of a new, clear and simplified system reflecting modern regulatory and business practices.”
At the centre of the reform is a new overarching principle that solicitors’ charges must be “fair and reasonable”, judged objectively by reference to the matter in question while taking account of the characteristics of the parties and the nature of the work.
This would apply both to the sums charged and to the contractual terms governing them, shifting the focus away from how agreements are reached. The consultation states that the concept of “informed consent” is “not appropriate”, arguing that issues about how fee agreements are reached are better dealt with under existing legal frameworks, particularly consumer protection law.
For lower-value disputes, the working group said the Legal Ombudsman represents “a more appropriate method” of resolution, with £50,000 suggested as the initial threshold. Court proceedings would be available only where there is good reason.
For claims outside the ombudsman’s jurisdiction, or above that threshold, clients would be required to exhaust internal complaints procedures and pursue mandatory alternative dispute resolution before going to court.
The consultation indicates that, in many cases that do reach court, agreed terms as to the basis of charging may be sufficient to establish that fees are reasonable.
It states: “For those cases which do result in court proceedings, we envisage that in many of them the fact that there are agreed terms explaining the basis of charging will be enough to justify concluding that the charges are reasonable.”
However, it recognises exceptions, including where a consumer may challenge a fee agreement under the Consumer Rights Act 2015 or where there is evidence of inefficiency in work billed on an hourly basis.
The working group acknowledged that the ombudsman is currently struggling to meet complaint-handling targets, but said the proposed structure remained the most proportionate model.
“Nevertheless, our proposed model seems to us to be the most proportionate structure to ensure that clients are provided with varied avenues to resolve their disputes, whilst simultaneously reducing the burden on the courts,” it said.
“However, this model simply will not function unless adequate funding is made available to LeO to facilitate its involvement.”
A consultation on the proposals is open until 16 July. A final report is expected in early 2027.