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16 December 2021
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Spelling it out

Francis Kendall on two cases highlighting the importance of clear retainer terms

 Informed consent has been a hot topic in the legal costs world, with the Court of Appeal set to hear an appeal against Belsner v Cam Legal.

 In that, Mr Justice Lavender held that personal injury law firms need their clients’ informed consent to the deductions that will be made from their damages for outstanding costs, even if that liability is voluntarily capped when it falls due. He said this meant more detail than simply stating that a client is likely be liable to costs not recovered from the defendant.

 It has become a particular point of contention in personal injury cases – notably in the various claims being brought by Checkmylegalfees against Slater & Gordon – but two recent cases show that it extends into other areas of practice.

 In Raydens Ltd v Cole [2021] EWHC B14 (Costs), a divorce case, Master Leonard held that increases in a law firm’s hourly rates during the course of a multi-year retainer amounted to special circumstances to order a Solicitors Act assessment of its bill despite the application being made out of time.

 At the time Ms Cole signed the engagement letter, she agreed to specified hourly rates payable over a period estimated at up to 18 months. The judge said the increases between 2014 and 2017 – from £245 to £320 for a partner and £100 to £165 for a junior assistant – called for an explanation.

 Master Leonard said the client might “reasonably” have anticipated one annual hourly rate review before the litigation concluded, but “I do not believe that anyone in her position could reasonably have anticipated that before it was over, she would be paying the senior fee-earner and his assistant hourly rates that had increased by over 30% and 65% respectively”.

 The firm’s argument that it took into account the rates charged in its local market as well as rates charged by similar specialist firms in London offered “a broad context for the rises, but not an explanation”, he said.

 The judge speculated that, while the assistant’s rate may have risen due to his increasing seniority and experience, this would raise the question of whether he should have been replaced by someone whose hourly rate was closer to that originally agreed. “It does not seem to me to be an answer to any of these concerns to say… that the defendant had the choice of discussing these increasing rates with the claimant or just ceasing to instruct the claimant.

 “With regard to discussion, if there is an explanation to justify such exceptional hourly rate increases, it does not seem to have been offered to the defendant, who was presented with a fait accompli.

 “It is common ground that the defendant’s experience of the matrimonial litigation has, over the years, taken a severe toll on her mental health, for which she has needed treatment. The defendant herself has said that she felt at the time that she had no choice but to accept the increases, and I find that quite credible.”

 Well-known London firm Farrer & Co had a better experience with Master Leonard, however, in its former asylum client’s argument that it did not have her informed consent to the retainer.

 The points of dispute raised the issue of informed consent in a number of respects. Farrers’ hourly rates ranged from £200 per hour for a paralegal to £600 per hour for a senior partner, which Master Leonard in Farrer & Co LLP v Yertayeva [2021] EWHC B16 (Costs) ruled were not “of an unusual nature or amount” when “properly judged in context”.

 He found that the client “understood the level of service the claimant proposed to offer, she wanted that level of service and she was prepared to undertake the expenditure attendant upon that level of service, because she wanted to give her asylum application every chance of success”.

 Even if the client had not read the retainer before signature – which assertion was not accepted – she would not have been free from the contractual arrangements to which she agreed.

 The message from these cases is as simple as it is clear: spell out the details of your retainer, make sure the client understands them and take down a detailed attendance note.

 It is a shame that such judicial guidance may come too late for some files but there is a significant message here which has been afoot for some times. The old approach of “here are our hourly rates” coupled with “we estimate it will cost £X to get through the first stage of our instruction” seems simply unacceptable now – particularly when preparing a budget (even if only client facing) is easily undertaken for 1% of the case spend by a costs lawyer.

 That can be extremely good value given what’s at stake. It also leads to certainty for both the client and the law firm – an approved early budget is irrefutable informed consent and should avoid a costly after-the-event dispute on costs entirely.

 Francis Kendall is vice-chair of the Association of Costs Lawyers and director and Costs Lawyer at Kain Knight (City)

This article first appeared in Litigation Funding on 16 December 2021

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