Doing what you agreed & getting paid…

 In Probate

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The case of Minkin v Cawdery Kaye Fireman & Taylor [2011] EWHC 177 – as it applies to the probate practitioner

The recent case of Minkin v Cawdery Kaye Fireman & Taylor [2011] EWHC 177 presents all solicitors with a risk management lesson. Craft your retainer carefully, keep the client updated on costs and beware terminating your retainer without good reason and without reasonable notice to the client.

The facts

This case, whilst concerning matrimonial litigation, is, however, of general application in respect of the handling of terms of engagement with clients.

A partner in the firm of Cawdery Kaye Fireman & Taylor (CKFT) was engaged to represent the claimant at a hearing following an ex parte non-molestation & occupation order. The partner accepted the instructions and sent the client an e-mail with an estimate of costs of £3,000 + VAT which was based on a trainee solicitor attending court behind a junior barrister. The e-mail said “I doubt very much that we can do this cheaper and I understand that it is a sizeable sum”. The client paid £2,000 on account.

The firm subsequently sent an engagement letter with a heading of “Non-molestation & Occupation Order”, which the client signed and returned. The letter did not set out what the firm agreed to do for the client. It said “… our overall charges and expenses for this matter are likely to be £3,500 + VAT [i.e. £4,025]. I will try to keep costs down as much as possible, hopefully to £3,000 + VAT.”

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The letter also promised to keep the client up to date on costs in writing; with a promise to invoice on a monthly basis with a statement as to the actual level of charges incurred against the estimate. They promised to telephone or write when their charges reached £3,500 and at increments of £1,000 thereafter.

In addition to the engagement letter there was also a set of Terms of Business. Clause 4 stated that ‘estimates are a guide and there is no guarantee the final charge will not exceed the estimate because there are many factors outside the firm’s control which have a bearing.’

The day before the hearing the wife applied for and was granted an adjournment of the non-molestation order (the occupation order was dismissed as she had let the property to tenants!) to enable her to obtain legal representation.

Two days later the firm sent the client an invoice for £5,472.50 with credit given for the £2,000 paid on account. Perhaps understandably the client expressed his dissatisfaction with the bill. The reason given was the extra work caused by the wife letting the property. The client said he could not pay until he had a costs order against his wife. The partner said the firm needed to be paid or it could not continue to act. The partner continued to work on the case and the client paid a further £1,000.

The partner asked for but did not receive the outstanding sum on the original invoice and submitted a further invoice for £3,565 when the client said he had lost confidence in the partner and did not want the firm to act any more. The firm wrote to the court stating that it was no longer instructed. The client applied for a detailed assessment of the two invoices under s.70 Solicitors Act 1974.

The decision

Senior Court Costs Office

The Master assessed the two bills at £5,721.25 in total but decided that because the firm had terminated its retainer without giving reasonable notice it was not entitled to any costs and should refund the costs already paid by the client.

The firm challenged this decision but at the full hearing the Master whilst upholding his original decision gave different reasons, as follows:

  1. The firm was in breach of contract on each occasion that the partner stated that the firm would not act without payment;
  2. The firm was contractually entitled to render interim accounts, payable immediately, which the client was contractually obliged to pay on receipt;
  3. The firm was contractually entitled to suspend work if the client delayed payment without reasonable justification but it would constitute a repudiatory breach if the firm terminated the retainer by e-mail when the client had reasonable justification for delaying payment;
  4. The client had reasonable justification for delaying payment under clause 6 of the firm’s standard terms, because the firm’s first bill exceeded its estimate. The matrimonial proceedings had not been concluded and that was what the estimate was intended to cover. The client had complained promptly about the first bill. As the client had reasonable justification for non-payment, the firm had no right to suspend work.

High Court

The firm appealed. The case was heard by Mr Justice Cranston sitting with two assessors. The appeal failed since the Court can only interfere with a Master’s decision if it was satisfied that his conclusion lay outside the bounds within which reasonable disagreement was possible.

Cranston J held that clause 6 of the firm’s standard terms, which entitled the firm to suspend or terminate its services to a client if the client was overdue with payment without reasonable justification, had to be read as being subject to clause 13, which provided that the firm could only terminate its engagement on reasonable grounds and on giving a client reasonable written notice.

At common law, it is not a good reason for the termination of a retainer that a client had not paid part of the profit costs since a solicitor entering into a contract is usually taking on the ‘entire contract’ and so is only entitled to be paid when the whole job is completed. If a solicitor wrongly terminates the contract on the basis that they have not been paid for an interim bill they cannot sue for the outstanding fees, having not performed the obligations undertaken. If a reasonable sum on account is requested, a solicitor can terminate a contract under s.65(2) Solicitors Act 1974 if a client does not pay within a reasonable time.

Cranston said:

“The estimate was important to the client because he had limited funds, a fact the partner knew. Although in the retainer letter the firm undertook to give written notice of an estimate being exceeded, no advanced warning had been given to the client when the estimate was exceeded.”

He went on to say that this was a serious breach of contract because it amounted to a threat to ‘down tools’ and as such it was a termination of the contract by the firm and not the client.

Although the court acknowledged that the outcome may seem harsh on the firm, the fact is, it should have been clearer in its retainer letter as to the nature of the engagement. It should have complied with the retainer letter and its terms of business.

Practice points

  1. If you prepare a letter of engagement and also have separate terms of business ensure that you read them carefully and that they are compatible.
  2. Many probate complaints involve arguments about delay and the level of costs. In complying with Rule 2 (supplying an estimate of fees and expenses) a firm must regularly check its work against any estimate given and revert to a client before it is exhausted; explaining how the estimate has been used and agreeing a fresh budget to conclude the retainer.
  3. It makes sense to keep a client updated on costs because it is vital to manage a client’s expectations and it is not always possible to stick with the original estimate. For example, a claim under Inheritance (Provision for Family & Dependents) Act 1975 may be received or an item of foreign property is discovered, which can seriously derail an original cost estimate.
  4. Many firms spent time and effort in designing engagement or retainer letters and terms of business but given their standardisation ignorance or lack of familiarity over time can easily give rise to similar problems as those experienced by CKFT
  5. Standard letters and standard terms will not protect a poor judgement call when putting together an estimate. If it way out then it will not be at all helpful and could result in no payment at all! Be absolutely clear about what is to be done for what price. In probate cases it is increasingly common to estimate or quote for various steps in the probate process. This means great care is needed to work within each designated box and keep a careful eye on the work-in-progress. Be aware of when your firm posts your time recorded as delays in posting can prove disastrous in such cases if you thought you were well within your estimate only to find your print out did not include the hours you spent yesterday on the matter.
  6. Don’t forget that a complaint about a bill is like any other complaint – your complaints procedure must be invoked. Try and negotiate and look at it from the client’s perspective. It is surely better to have 75p in the pound rather than nothing at all and a large bill of costs for pursuing them in the courts!

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