New Standard Contractual Terms
1. Since 1988, there have been standard, default terms on which barristers offer their services to solicitors (Annexe G1 to the Code of Conduct, “the Standard Non-Contractual Terms”). These Terms are in principle backed up by the Withdrawal of Credit Scheme.
2. There are also Standard Contractual Terms (Annexe G2), which since 2001 barristers have been entitled to use; but use of those terms depends on agreement between the barrister and the solicitor and in practice they have been used rarely.
3. The cab-rank rule currently attaches to instructions delivered on the Standard Non-Contractual Terms but not to instructions delivered on any other terms.
4. In practice, for some years, the Law Society has been refusing to co-operate with the withdrawal of credit scheme and to treat non-payment of Counsel’s fees as professional misconduct. As a result, absent a contractual right to be paid, the enforcement of outstanding fees has been increasingly difficult in many cases.
5. The Bar Council has for many years been seeking to agree with the Law Society standard contractual terms that would apply in place of the Standard Non-Contractual Terms, but those prolonged negotiations broke down at a very late stage in 2010. Accordingly, the BSB saw fit to proceed unilaterally with revised contractual terms. Under the Legal Services Act 2007, a change in the Code of Conduct to replace the Standard Non-Contractual Terms with standard contractual terms requires the approval of the Legal Services Board (“LSB”).
6. The LSB gave its approval to the proposed new standard contractual terms “the New Terms”) on 27 July 2012. This was unexpected, both in principle and in terms of timing.
7. The New Terms are linked to this page, as are the proposed amendments to the code, and should be read carefully. They create a contract between the barrister and the “authorised person” who instructs him to supply the services to the lay client, and they acknowledge a common law duty of care owed to the lay client. Liability to any person other than the lay client is excluded, so far as it lawfully may be. The fee is whatever is agreed or, if none is agreed, a reasonable fee. Interest is payable if an invoice is not paid within 30 days.
8. Under the Legal Services Act, an authorised person may be an entity, a firm or an authorised individual. It is clearly important to know with whom exactly the barrister is contracting.
9. The proposed changes to the Code of Conduct are also attached. The essential change is to detach the cab-rank rule from the Standard Non-Contractual Terms, which will be removed from the Code, and attach it instead to instructions that are offered on the New Terms. However, matters are not as simple as that suggests.
10. The essential points to note are the following:
(1) The New Terms are not default terms. That means that once the Code is changed, if no terms are expressly or impliedly agreed between the barrister and the solicitor no terms exist. If the solicitor offers work on the New Terms, the barrister is bound to accept the work on those terms, subject to the familiar exceptions to the cab-rank rule.
(2) The cab rank rule will also apply in relation to any terms that a barrister or his chambers advertise as terms on which they are willing to accept instructions. All chambers are required in any event to advertise the terms on which they do work, whether those are the Standard Non-Contractual Terms, the Standard Contractual Terms or any other (or no) terms. COMBAR is understood to be negotiating with the City of London Law Society to seek to agree better, commercial standard terms and the ChBA will liaise with COMBAR about those intended terms. But in principle any set of chambers can devise its own terms and offer to do work on those terms, and the cab-rank rule will apply to work offered on those terms or on the New Terms. In practice, therefore, a barrister cannot require his own terms to be used but a solicitor can require the New Terms to be used.
(3) The cab-rank rule applies in relation to the New Terms not just if a solicitor instructs a barrister but if any “authorised person” regulated by the Solicitors Regulation Authority instructs a barrister. That could therefore include an alternative business structure under Part V of the Act of 2007 or a non-solicitor employee of a firm or entity regulated by the SRA.
(4) The moribund Withdrawal of Credit Scheme will be removed from the Code and in its place will be a List of Defaulting Solicitors, to be run and published by the Bar Council. The presence of a name on this List will mean that the cab-rank rule is disapplied, but a barrister may nevertheless accept instructions from that person on any terms that may be agreed.
(5) In principle, the New Terms (or other agreed terms) will apply to all instructions accepted after the change in the Code. It is not yet clear whether any transitional provisions will apply in relation to further instructions from the same person in a matter on which the barrister is already instructed, but this appears unlikely.
11. The practical implications of this are that, by the time the Code of Conduct is changed, every set of chambers (and sole practitioner) needs to change their systems to deal with a contractual basis of working with solicitors (and other authorised persons), and with the ability of SRA-regulated authorised persons to require work to be carried out on the New Terms. They will also need to decide whether they wish to offer services on other terms.
12. It is thought that the change from a (mainly) non-contractual basis of work to a contractual basis may have implications for the basis on which VAT is payable. The Association of Barristers’ Clerks and the Association of Practice Managers are investigating this and further information is likely to be available soon.
13. You will be notified as soon as the BSB has set a date for the changes in the Code. Subject to further representations from the Bar Council, the BSB is understood to be keen to implement the Code changes by the end of October. For the time being, everyone should therefore work on the assumption that these changes may be effective by that time.
Timothy Fancourt QC
3 September 2012
