Client Care Letter Pitfalls
Client Care - An example of the pitfalls when the firm gets it wrong...
We are frequently asked when we visit clients during one of our Practice MoT's, why we place so much emphasis on client care and terms of business letters. The answer is always the same; it's not us who places the emphasis on them, but rather the Solicitors Regulation Authority, Law Society, Legal Services Commission and Legal Ombudsman. These organisations scrutinise client care letters carefully at audit, or when a customer complains.
Client care letters are no longer simple. Despite the insistence that all correspondence to the client be kept simple, there is simply too much detail nowadays to accomplish this easily, much to the frustration of the profession.
The case study from Family Law Week that follows is an example of where client care letters and continuing information to the client may not have been sufficient, resulting in a punitive measure against the firm in question. The case study is for a family matter, but the principles would apply to most categories of law.
Extract from Family Law Week
"Cranston J finds against solicitors' firm in dispute as to retainer
Court finds that firm's refusal to work until outstanding fees are paid constitutes repudiation of contract
Mr Justice Cranston, sitting with assessors, has dismissed the appeal by a firm of solicitors against an order of Master O'Hare, sitting as a costs judge, that where solicitors in matrimonial proceedings refused to carry out work until outstanding fees, or an amount on account, were paid, the refusal constituted a repudiation of the contract and no fees were payable.
In Minkin v Cawdery Kaye Fireman & Taylor  EWHC 177 (QB), Cranston J provided guidance in relation to retainer letters which all family law firms may find useful. The court heard that the respondent, Mr Minkin, was involved in matrimonial litigation with his wife, from whom he had separated. Mr Minkin contacted the firm and said that he wished it to represent him at a final hearing in relation to an occupation and non-molestation order, which Mrs Minkin had obtained on a without notice basis. He was told that the firm would be able to undertake this work and would like to instruct counsel to advise in conference, and to represent Mr Minkin at the hearing.
An estimate of fees in the sum of £3,000 + VAT was given to Mr Miskin and he paid £2,000 on account. The firm then sent the client a retainer letter saying "our overall charges and expenses for this matter are likely to be £3,500 plus VAT [i.e. £4,025]. I will try and keep costs down as much as possible, hopefully to £3,000 plus VAT." However, there was no indication as to what the firm was undertaking to do. Mr Minkin signed the retainer letter.
The conference with counsel took place and the firm undertook further work for the hearing. However, the day before the hearing it was discovered that Mrs Minkin had left the matrimonial home and rented it to tenants. The hearing took place, as anticipated. The occupation order was dismissed. However, Mrs Minkin applied for an adjournment of consideration of the non-molestation order so as to obtain legal representation. The court agreed to an adjournment.
The firm then sent Mr Minkin an invoice 'payable on presentation'. It also advised Mr Minkin of his right to a detailed assessment of the Bill on the back of the invoice. The Bill was for £5,472.50. It gave credit for the £2,000 paid on account. £3,472.50 was said to be owing.
Mr Minkin said that he was not happy with the amount billed. It was explained that the costs estimate had been exceeded largely as a result of an increase in work because Mrs Minkin had unexpectedly rented the matrimonial home. Mr Minkin said he could not pay the fees until he had a costs order against Mrs Minkin . It was explained that the firm needed to be paid if Mr Minkin wished it to continue working. Later that day Mr Minkin agreed in an email to send the firm a further £1,000.
A second bill was sent to Mr Miskin.
Eventually the firm emailed Mr Minkin to say: "[The] position remains as before in that we cannot continue to act in circumstances where there is a substantial amount outstanding. To summarise there is £2,472.50 outstanding from our first invoice and there is about £1,100 of work in progress."
Mr Minkin replied that he had lost confidence in his solicitor and that he did not propose to issue further instructions. In the event, the firm wrote to the court stating that they were no longer instructed. At the hearing of the occupation order Mr Minkin acted in person and confirmed to the court that the firm no longer acted for him. Mr Minkin did not complain that the firm failed to represent him at that hearing.
Mr Minkin applied for a detailed assessment of the Bills in the case.
The Master held that the firm was in breach of contract on each occasion when they said they would not continue to act without payment. Mr Minkin had reasonable justification for delaying payment in that the first bill exceeded the estimate. The matrimonial proceedings had not concluded and that was what the estimate was intended to cover. Mr Minkin complained promptly about the first bill. The firm had no right to suspend work. In the Master's judgment the retainer was terminated by the email in which the firm refused to do further work without payment. That was a repudiatory breach of contract because Mr Minkin had a reasonable justification in not paying. That repudiation was accepted in Mr Minkin 's return email later that evening. The breach was a serious breach. The firm "downed tools", in particular in refusing to contact the court, thereby destroying the prospects of a continuing relationship with Mr Minkin . The firm was not entitled to any costs. The firm had to refund all the amounts paid, less counsel's fees.
Cranston J upheld the decision of the Master. He said:
'The outcome may seem harsh on the firm. But the fact is that it should have been clearer in its retainer letter as to the nature of the engagement. That may have allowed it to inform Mr Minkin that pursuit of the tenants his wife had allowed into the matrimonial home did not fall within its ambit. It should also have complied with the terms in its retainer letter and those in its standard terms of business. Under these it should inform a client in writing when it appears that any previous estimate may be exceeded. It must then consider whether, in the circumstances, the client has reasonable justification for not paying and whether it would be reasonable to terminate the contract for non-payment. And it can only do that with reasonable notification.'"
If you would like to know if your client care and terms of business letters are compliant, or any other processes and procedures within your practice are, then you may be interested in CPM21's Practice MoT service, more details of which can be viewed on our website at;