In light of controversy regarding the Bar Council’s proposed contract terms, and recognising that it would be costly and time-consuming for barristers to draft alternative terms for the supply of services by barristers, the Commercial Bar Association (“COMBAR”) and the City of London Law Society (“CLLS”) negotiated specimen contractual terms.
The COMBAR/CLLS terms are explicitly intended only for application in commercial cases and are meant only as a starting point for negotiation of individual contracts. They do not represent the optimal terms on which commercial barristers might contract with solicitors. Instead they represent the outcome of a negotiation and, in certain respects (most importantly the absence of a default basis for payment of barristers), the COMBAR/CLLS terms reflect the fact that no common position could be agreed.
Some chambers and solicitors have used the COMBAR/CLLS terms as the basis for the development of their own terms; others have prepared bespoke terms; and some barristers still prefer not to contract for the provision of their services at all. However, the COMBAR/CLLS terms have been fairly widely adopted in practice.
With effect from 1 January 2014 COMBAR and the CLLS published an updated draft of the terms which builds on practical experience of using the terms, makes clearer the effect of certain terms and reflects certain regulatory changes (in particular, the replacement of the Code of Conduct).Detailed guidance on the COMBAR terms (as revised) is available on the COMBAR website (www.combar.com).
However, generally speaking: careful consideration should be given by barristers as to whether they wish to adopt the COMBAR/CLLS terms at all. For many types of case they are not suitable. They are not recommended for non-commercial cases; where solicitors propose terms that differ from the COMBAR/CLLS terms and the Bar Council terms (particularly in respect of the liabilities owed by barristers to solicitors), barristers should proceed with care – and may need to discuss whether it is possible to agree those terms with the Bar Mutual Indemnity Fund (BMIF).
The basis for payment
One element of the COMBAR/CLLS terms that has attracted particular attention is the existence of varying bases for payment. The preferred position for barristers in most cases will be that the solicitor should bear direct responsibility for payment, regardless of whether the lay client puts the solicitor in funds. That is the basis for payment embodied in the Bar Council Terms. It is the basis provided for in Basis A of the COMBAR/CLLS terms.
The CLLS would not, however, agree that in all cases solicitors should bear direct responsibility for payment of the barrister’s fees. Nor would they agree that this should be the default position in the absence of agreement. The COMBAR/CLLS terms accordingly include a variety of different options for payment. Of these, the most commonly adopted (or required by solicitors) is Basis B, under which the Solicitor agrees (a) to pay to the barrister any sums properly due within 5 business days of receipt by the solicitor from the lay client of payment in respect of the barrister’s fees; and (b) to endeavour to collect the barrister’s fees from the lay client in the same manner as the solicitor endeavours to collect the solicitor’s own fees.
Basis B (together with Bases C and D under which the barrister contracts directly with the lay client for the payment of fees) has the actual or potential consequence of exposing barristers to a credit risk in respect of the lay client. Sometimes that will be a risk that the barrister is willing to bear: for example, if the lay client is a large, publicly quoted company.
Sometimes that is a risk which the barrister cannot afford to assume (for example, if the lay client is an overseas company with no, or no discernible, asset base or access to liquid funds). More frequently still, the barrister will not be in a position to assess whether the credit risk is acceptable or not. Generally, barristers who are uncertain as to whether to take a credit risk on the lay client would be well advised to contract on Basis A instead.
The COMBAR/CLLS terms provide various mechanisms to mitigate the risks which accompany Basis B – but do not eliminate those risks. The mechanisms include (at clause 9.10) a reporting obligation on the solicitor if the solicitor becomes aware that the lay client will be unable or unwilling to pay the barrister’s fees; (at clause 9.11) a right to take an assignment of the cause of action against the lay client; and (at clause 9.12) an obligation on the part of the solicitor to pay sums which the barrister would be unable to recover as a result of negligence caused by breach of duty by the solicitor (and not the barrister).
The COMBAR/CLLS terms also include optional clauses which are designed to provide further protection. If a barrister wishes to take advantage of those terms, that will need to be specifically agreed with the solicitor. In particular, Clause 20.4 is a specimen term requiring the solicitor to take monies on account of the barrister’s fees. Clause 20.5 is a specimen term providing for monies to be held on escrow by BARCO. Where there is a discernible risk of non-payment by the lay client (or enforcement of any potential claim against the lay client is likely to be difficult), barristers would be well advised to insist on the solicitor holding money on account or paying money into BARCO.
More generally, however, barristers need to manage their exposure to credit risk. Insisting on a clear payment schedule and monitoring compliance with that schedule can do that, but will require barristers and their administrative staff to be alert to delays in payment. Clause 16.4 permits a barrister to terminate the agreement if fees have not been paid by their due date, 10 business days’ notice in writing of an intention to terminate has been given, and the fees have not been paid by the expiry of the time given.
Entering into a contract potentially gives rise to new liabilities against which barristers have traditionally been uninsured. Prior to their publication (and revision) the COMBAR/CLLS terms were discussed with the BMIF, which made adjustment to the Terms of Cover to reflect the transition to contracting and the potential new liabilities which might accompany that transition.
The current edition of the Terms (2014) continues to exclude claims in respect of any liability incurred under any express term of a contract, save to the extent that (a) such liability would have been incurred in the absence of such express term and would otherwise fall within the provisions of these Terms of Cover; or (b) the contract is between the Insured member and instructing solicitors or a client and, insofar as its terms concern a contractual liability of the Insured Member, is in a form previously approved by Bar Mutual. BMIF has confirmed that it will indemnify barristers against liabilities arising solely as a result of entering into a contract on the COMBAR/CLLS terms up to a limit of £100,000. This limit will be the subject of review in the light of BMIF’s claims experience over time. In accordance with this extension, clause 12.4 limits a barrister’s liability to the lay client or the solicitor which is exclusively contractual to £100,000.
Barristers that are contracting on bespoke terms or on some variation to the COMBAR/CLLS or Bar Council terms need to take particular care to ensure that those they are not accepting liabilities for which they have no insurance.
Administration of instructions
The change over to contracting has had a profound effect not just on the relationship between barristers and solicitors, but also on the appropriate approach to the administration of instructions accepted by barristers in chambers. Prior to 2013 clerking teams have tended not to focus on the detailed basis on which barristers’ services are to be provided.
In the “new world” of contracts, barristers (and their clients) will want certainty as to the basis of their instruction. “Battles of the forms” should be avoided. The basis on which the contract has been agreed and payment is to be made must be recorded and those records retained in the event of a dispute.