Finding the bottom line in the complex world of legal fees

No matter how carefully you go about your business, it is virtually impossible to avoid life events that will involve some kind of legal action and expense.

Whether you need to transfer a property, sort out the consequences of a traffic accident or take a constitutional case to secure an education for your disabled child, you will be dealing with professions that do not consider the calculation of fees to be an exact science.

There are around 5,000 solicitors and 1,300 barristers working in the State and, under the Competition Act, neither the Law Society nor the Bar Council can recommend a scale of fees to members. Mr Ken Murphy, director of the Law Society, says that the market for legal services is extremely competitive and that all legal costing is governed by the general principle of reasonableness.

When an individual takes legal action, it is very difficult to establish at the outset what the ultimate costs will be because the solicitor cannot be sure how quickly the matter will be settled.

However, on taking instructions, the solicitor should provide, in writing, details of what the actual charge will be or an estimate of the costs.

If, due to the nature of the case, it is not possible to make an overall estimate, the client should ask for a breakdown of the basis on which charges will be made. Mr Murphy advises that any client should ask in advance what the charges will be and be satisfied with the answer. "No client should ever feel aggrieved and think they have nowhere to turn for action. A complaint may be made to the Law Society or referred to a taxing master, and clients can have overcharges returned to them," Mr Murphy said.

The solicitor should also be able to provide information about barristers' charges in advance.

The payment the solicitor receives for providing legal services is called the instruction fee and excludes other costs such as witnesses' and expert advisers' costs, discovery costs and court fees, which all appear on the bill of costs. The client receives the bill of costs at the end of the case.

Solicitors' and barristers' fees are subject to 21 per cent VAT. Solicitors' fees tend to be twice or three times as high as barristers' fees because of the extra time they spend on a case.

In a dispute over the level of costs of Larry Goodman and his companies in the Beef tribunal, the taxing master said the calculation of an instruction fee was not an exact science. "One should not try to apply too rigid an approach to its calculation . . . the approach would seem to be an open-minded one; realistically, a totally objective approach."

That may not be a very reassuring system from the client's point of view as the assessment of the instruction fee is a complex process involving many factors.

According to taxing master, Mr James Flynn, who, along with barrister Mr Tony Halpin has written a book about legal fees, the calculation of the instruction fee is based on two main elements. The first is the total amount of time devoted to the case from the date of taking instructions to the date of receiving judgment. Many of the bigger firms have computerised time recording, which records every minute spent by a solicitor or other staff on each case. In smaller offices the fee is calculated on the "weight of the file", that is the sum of charges for every letter written, phone call made or meeting held. That is straightforward enough but it's the second element that is open to interpretation. Every factor specific to the case is assessed and the more complex the case, the more likely it is the solicitor will apply an "uplift", which may be some multiple of the time factor amount. So what factors can drive up the cost of fees? The unique and complex nature of the case, its importance and urgency will have a bearing on what it's worth. Where money or property is involved, its amount or value is taken into account. If the case demands great skill or specialised knowledge on the part of the solicitor, naturally they can and will also charge more.

Most people are not involved in the legal system at a very high level. But even relatively common cases such as traffic accidents, personal injury claims or disputes between neighbours can cost the loser and sometimes the winner dearly. The client who wins the case is generally awarded his or her costs by the judge. But a prospective client should be warned that this will almost certainly not include all the costs.

There is a distinction between "part and party" costs and "solicitor and client" costs, and it is the "part and party costs" that are covered by the award. These include one meeting and one letter, but additional correspondence and meetings are "solicitor and client" costs and must be met by the client. Barristers' fees are based on a "brief fee", which is the price of taking the case, researching it and preparing to present it in court, and includes the first day in court. Subsequent days are charged on the basis of "refresher fees", and, depending on which court is involved, whether the barrister is a senior or junior counsel and their level of experience and reputation, they can range from a few hundred pounds up to £5,000 per day.

For those who are concerned about meeting the costs of legal action, there is the option of means-tested civil legal aid. The Legal Aid Board assesses disposable income, which it defines as gross income less taxes, mortgage and other outgoings. The upper limit of disposable income is £7,350 and a significant proportion of the population qualifies, according to the director of the Legal Aid Board, Mr Frank Brady.

Clients must make a contribution towards costs, based on their disposable income. The minimum payment is £23 and the fee goes up on a sliding scale to a limit of £596. The Legal Aid Board has 30 offices around the State and handles 14,000 cases per year, the vast majority of which are family law cases. According to Mr Brady, many people are looking after their own divorce cases with assistance from the court offices. This is generally only practicable when there are no issues of property or pensions to be decided. The high cost of legal proceedings and the limited civil aid system have been criticised for effectively denying many people access to justice. The Consumers' Association of Ireland wants to see the civil legal aid system reduce its limits and fees.

It also believes that consumers should be allowed under the law to manage conveyancing or orders for transfer of property themselves, only involving a solicitor if absolutely necessary.

Conveyancing fees vary but are generally between 1 and 1.5 per cent of the cost of the property, and added to that are other costs such as land registration and stamp duty. Many people take advantage of the "no foal, no fee" deal with solicitors in personal injury cases, where they only pay if the case is successful. But that agreement only applies to one side and no solicitor can guarantee their client won't be liable for the other party's costs if they lose the case.