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Solicitor and client costs - common issues and pitfalls

24 July 2020
Roger Mallalieu QC delivered a talk on assessments brought under the Solicitors Act 1974, the various pitfalls and where Solicitors commonly have difficulties, and how those difficulties can be reduced.

There seems to be an increase in Solicitor/Client assessments in two areas; 1) Low value personal injury claims where the success fee is deducted from damages, and 2) Large commercial disputes as clients are become more aware of their rights to challenge fees.

Retainers

To limit the level of challenges, Solicitors should always review their retainer and T&Cs once a year. The benefit of an independent pair of eyes, even a second lawyer in the same firm that was not involved in the drafting, should consider the retainer documentation from an objective standpoint.

Whilst it is good practice to limit the scope of the retainer from a liability point of view, keep a focus on the scope (e.g. how many opponents, the level of transactions etc). If the instruction evolves then so should the scope of retainer to ensure all work is captured by it.

When preparing retainers, remember the 'danger of a good idea' in trying to tailor a standard retainer to a case. If entering into a unique funding arrangement, then seeking advice from a Costs Lawyer / Costs Counsel is highly recommended.

Remember a fixed fee retainer is not beyond challenge as the retainer is still a contentious business agreement for the purpose of Section 59 of the Solicitors Act 1974. The Solicitor would need to apply to the Court to enforce the terms of the retainer, and then the Court would determine if the fee is fair and reasonable. A problem could arise in that the Court could compare the fixed fee to an hourly rate assessment.

To reduce the chances of a dispute arising out the retainer it is important to ensure:

  • Compliancy and not reviewing breeds problems 
  • There is a well drafted retainer checked at least annually by an independent lawyer
  • Detailed attendance notes of when funding is discussed with the client are kept, and such conversations are confirmed in a follow up letter/email.

Termination of the retainer

The termination clauses must be easy to understand for the lay-client. By way of example, should a Solicitor terminate the retainer if the client rejected his/her advice about a Part 36 offer, the client could argue that the advice had to be reasonable, and this included allowing the client to reasonably query the advice and if need be get counsel’s opinion. In this scenario, the Court may find that the Solicitor wrongfully terminated the retainer and lose his/her right to payment.

Estimates

Whilst case law says a lack of an estimate should not be to benefit a Solicitor, as a general rule of thumb in practice Solicitors suffer through bad or not updated estimates rather than through not giving one.

In cases subject to Costs Management the client needs to know if there's any limits on the costs being recovered from the other side. If there's a case where the client's recovery is limited, he/she must be told about the shortfall. For example, if the use of Leading Counsel is not allowed but a Senior Junior is, then the client needs to be told that the higher fees of Leading Counsel will not be recovered.

Informed consent is crucial to the work being undertaken - the client has to understand what work is being done and why.

Billing

Poorly prepared bills make costs disputes more likely and costly .

If you want to interim bill, you need to make it absolutely clear you intend to in the retainer. Generic statements such as, "we reserve our right to interim bill" are not sufficient. The Client needs to be told of their right to assessment and any time limits. If the client is not told, court is likely to hold not interim bill.

Key aspects of statute bill:

  • Must include a narrative setting out the work and providing a breakdown (providing a copy of the WIP is useful if it is detailed) so that the client knows what they are being billed for.  It is not sufficient to say along the lines of "professional services from X date to Y date."
  • Make sure the bill sets out the client's right to assessment.
  • You need to be careful with gross sum bills as these still need narrative, and you must provide details of the time limits running.

Please contact Simon Fisher to discuss any of these issues in more detail.

Further Reading

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