Tip One – Retainers
Ian Moxon, Costs Lawyer
For many years I have provided costs training seminars to Solicitors. At the end of each session I will usually provide my “top ten tips”. Those tips are aimed at addressing the most common mistakes made by Solicitors whose main income is from inter partes costs.
Tip One – Make sure you properly set up the retainer with your client before doing any substantive work on the case
Too many fee earners (keen to get their teeth into a new case) fail at this first hurdle. The above sounds very obvious and is dealt with by hastily sending out a standard client care letter and/or Conditional Fee Agreement to a distant client they have never met and quickly ticking the boxes of a standardised “Due Diligence Questionnaire”. Act in haste and repent at your leisure.
What or who is a client?
Section 87(1) Solicitors Act 1974: In relation to contentious business, any person who as a principal or on behalf of another person retains or employs, or is about to retain or employ, a Solicitor, and any person who is or may be liable to pay a Solicitor’s costs.
Obvious, right? However, what about the insane, Bankrupts, children, the non-existent and the dead?
If there is no enforceable retainer in place, the Solicitor cannot charge his own client for the work he has done. Moreover, because of the Indemnity Principle, if no enforceable retainer exists, then there is no recovery of costs between the parties (because the client has no liability to pay his own Solicitor’s costs).
The insane
Young v Toynbee (1910) 1 KB 215
This historic case established the principle that, where a Solicitor conducts litigation without the authority of the person for whom he purports to act, the Solicitor may be held liable to the opposing party for the costs thrown away in the abortive proceedings.
In this case, a solicitor was retained in anticipation of an action for defamation. The client (the Defendant) was subsequently certified as insane. The solicitor was unaware of this, carried out work and served a Defence. Even though the Solicitor had acted in good faith, he was held personally liable for the costs of the Plaintiff.
(and, of course, besides having to pay the opponent’s costs, the Solicitor could not charge his own client either).
Bankrupts
Thomas Chambers v Miah (2013) EWHC 1245 (QB)
If the Solicitor fails to obtain the Trustee in Bankruptcy’s consent for the proceedings, he is at risk of a wasted costs order and will be unable to recover his own fees as well.
(So, carry out a Bankruptcy search at the outset of the matter and obtain the necessary consent from the Trustee before going any further).
Children
Those Solicitors acting for children, with instructions and retainer via a Litigation Friend, will do well to read carefully CPR 21.9(6) sometime before the child attains majority. If the Litigation Friend was not advised about their ongoing costs liability and/ or the required Notice was not served, there may be a case for a wasted costs order against the Solicitor.
And, of probably more importance to those Solicitors whose major income is from inter partes costs, is that their entitlement to costs will usually cease when the child attains majority, unless a new retainer is entered into with the former child.
The non-existent
Simmons v Liberal Opinion Ltd (1911) 1 KB 966
In this case the Solicitors acted for a company in defence of Court proceedings. The company was found to be non-existent and, consequently, the Solicitors were held personally liable for the costs of the opposing party. As established by Young v Toynbee above, where there is want of authority to bring an action, in most instances the claim will be struck out.
Death
The death of a client will bring the retainer to an end. If instructions are received for the continuation of the claim for the benefit of the estate (as often happens), but no new retainer is entered into, the Solicitor’s entitlement to charge his fees ends at the date of death (and from that point onwards you will be working for free, regardless of any order for inter partes costs, unless something is done about the lack of a retainer).
So what is best practice?
Best litigation practice involves meeting your client at the outset for a face to face meeting (a phone call by a Paralegal followed by a standard letter and questionnaire is a recipe for disaster in my experience). At that meeting the Solicitor will then discuss with the new client (by way of background) what issues the client wants the claim to resolve. Due diligence checks will then include the client’s credibility, mental capacity, age, existence (identity checks) and whether they are subject of a Bankruptcy Order. The various funding options then need to be discussed along with the client’s own budget for the legal project. The matters discussed at that meeting should then be followed up in writing along with details about the suitable funding options. Further communications with the client can then confirm the agreed terms of business (and a retainer is then in place).
Systems should also be in place, as the file progresses, to check that your client is (1) still alive, (2) still exists (as a legal entity), (3) has not become bankrupt in the meantime and (4) has not attained the age of majority, if they were a child at the time of the initial retainer.
Mistakes in maintaining an enforceable retainer can sometimes be cured by a retrospective retainer (particularly Conditional Fee Agreement problems). However, making a funding contract (particularly a Conditional Fee Agreement) properly retrospective, as opposed to simply being backdated, is fraught with technical traps and, at that stage, you are best advised to seek guidance from a specialist Barrister (which will likely be at your own expense).