Well I am sure you can guess my answer but let’s look at this a little more scientifically shall we?
Chapter 1 of the SRA Code of Conduct 2011 requires that:
O(1.6) you only enter into fee agreements with your clients that are legal, and which you consider are suitable for the client’s needs and take account of the client’s best interests;
The guidance on Indicative Behaviours is that acting in the following way will show that you have complied with this:
Fee arrangements with your client
IB(1.13) discussing whether the potential outcomes of the client’s matter are likely to justify the expense or risk involved, including any risk of having to pay someone else’s legal fees;
IB(1.14) clearly explaining your fees and if and when they are likely to change;
IB(1.15) warning about any other payments for which the client may be responsible;
IB(1.16) discussing how the client will pay, including whether public funding may be available, whether the client has insurance that might cover the fees, and whether the fees may be paid by someone elsesuch as a trade union;
IB(1.17) where you are acting for a client under a fee arrangement governed by statute, such as a conditional fee agreement, giving the client all relevant information relating to that arrangement;
So I think that is pretty clear. You have to be offering your client ATE Insurance. If you don’t, how can you defend an accusation that you failed to give the client all relevant information when the SRA come knocking? You may as well call up your Professional Indemnity Insurer now and put them on notice.
Even if you do offer the client an ATE Insurance policy, a client who has a costs order made against him will, at the very least, lose some or all of his damages and will be most disgruntled and may say: “I know that you advised me regarding ATE policies and I opted not to purchase a policy, but you should have told me that I was making the wrong decision!” If the client complains to the SRA, they may well take the view that when faced with a client pursuing a risky course of action, your obligation was to meet with your client and ensure that they fully understood the risk they were taking and the complexity of the costs which could be ordered etc.
In practice many solicitors have already indicated that they would be very reluctant to act for a client who indicated that he wished to pursue his claim without the benefit of an ATE policy – the practical burden of protecting oneself from a client complaint is too high.
So what does that mean? Well, be afraid, be very afraid…. If you don’t spell out why a client needs ATE Insurance then you are bang to rights. Even if you do, you need to make it very clear to them that you strongly recommend that they take it.
How do you achieve this? Well, we have a clever signing strip which our solicitors use with great success. It asks the client to sign one of two options: Proceed with ATE cover or Proceed without ATE cover. The without option spells out that they will be personally liable for any costs orders and disbursements if the case is lost. So far, it has worked every time.
Email me if you would like a copy.