Page 18 - Law Society of Hong Kong MPMC Manual v8 - With checklists (1 March 2018)

Practice Management Course | Unit 2
Financial Management

willing to put money in trust. It should also be easier to revise fee estimates
because both the lawyer and the client have agreed on what is outside the scope of
the matter.

46. In addition, the matter is more likely to be well managed with this high level of
detail: all stakeholders are clear on their role and what they need to do.
Consequently, the risk to profit is much lower. Indeed, this can be a good
performance management tool as it makes lawyers accountable for what they say
they will do.

47. Further, high-level scoping allows for client and leverage specific detail to be
included in the estimate. Thus, it adds to the knowledge management bank such
that future scoping can be done more accurately.

Managing client expectations
48. The issue of pricing does not end once a fee estimate has been provided.
Unanticipated events often change the cost structure of work.

49. Law practices are bound under Chapter 4 of the Guide to keep their original cost
estimate under review and to inform their clients as soon as possible of any
substantial changes to cost estimates. This is essentially an obligation to
demonstrate ‘cost consciousness’, which involves lawyers being continually mindful
of the fees they are incurring on a matter and working hard to keep the client
aware of extra costs or variations.

50. Sometimes, unforeseeable events occur and a revision of the original estimate is
legitimately necessary. A conversation with the client is necessary before any extra
work that is going to incur unexpected expenses is performed.

51. Do not make the mistake of just going ahead and doing the work ‘because it had to
be done’. It is possible that lawyers do this mostly because they are uncomfortable
with starting the conversation with the client. Indeed, if a lawyer is reticent to send
a bill to a client, it can often be due to the fact that more work was done than
should have been and the client has not been notified.

52. The difficulty with these client conversations comes from a failure on the part of
lawyers to recognise what is called the ‘perceived value gap’ and their inability to
communicate the value of what they are doing for their clients. Solicitors must be
able to express the benefit of any extra work (and extra cost) to the client in
language that the client understands. This generally cannot be done via letter or e-
mail. The lawyer needs to call or meet with the client and then follow this up with
formal documentation.

Revising costs
53. Below is an outline of a 10-step script to use to discuss revised costs with a client:

1. Summarise the existing We originally planned to do XYZ for $123 so that we could
situation achieve A.
2. Explain the trigger for
the extra work • As your matter has progressed
• As a result of a particular event
• After my consultation with a related expert or another

© The Law Society of Hong Kong (2018) Page 14