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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 [2011] 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;

https://www.cpm21.co.uk/index.php?page=25