Who are these case studies for?

All SRA-regulated firms, solicitors, registered European lawyers, registered Swiss lawyers and registered foreign lawyers. Any reference in this guidance to solicitors includes registered European lawyers, registered Swiss lawyers and registered foreign lawyers.

Purpose

These case studies are formulated to help you consider your professional obligations in circumstances where you are considering terminating a client retainer. They do not address the termination of a client retainer by a client or situations in which a retainer would ordinarily be subject to automatic termination (for example, on the death of a client).

Before reading these case studies you should familiarise yourself with our guidance on termination of client retainers by solicitors/firms.

Case study 1 - failure to pay costs on account

Scenario 1

A firm acts for a commercial client in relation to a contractual dispute being pursued by the client as claimant through legal proceedings in the High Court. The firm has asked the client to pay £20,000 on account of costs, some of which have already been incurred. Two months have elapsed since this request was made and the client has yet to make payment.

Our view

The work being carried out by the firm for this client relates to contentious business because it is being done for the purpose of proceedings begun before a court.

Section 65(2) of the Solicitors Act 1974 confirms that failure by a client to pay a reasonable sum on account of costs incurred in the conduct of contentious business within a reasonable time following a request by a solicitor will amount to a good reason to terminate the client retainer.

The firm should satisfy itself that £20,000 was a reasonable sum in the context of the total legal costs estimated to be incurred in the client matter and that two months was a reasonable amount of time for the client to make payment.

Assuming this is the case, the firm would be entitled to terminate the client retainer for non-payment of costs on account by giving reasonable notice to the client. We consider it good practice for this notice to include a proposed way forward that would allow the firm to continue to act for the client, for example if the client makes payment of the sum requested by a specified date.

The firm should carefully consider the period of notice that should be given to the client, taking into account any relevant provisions of its terms of business or letter of engagement. If a court hearing is imminent, we would expect the firm to ensure that the period of notice expired after the hearing had taken place. A shorter period of notice is more likely to be reasonable where no court hearing has been scheduled or where none is due to take place in the immediate future.

The firm should take steps to mitigate any risks to the client arising from the termination of the retainer. In this context, those steps could include making the client aware of any impending deadlines in the case and/or informing them that they are free to instruct another firm or act in person.

Scenario 2

A firm acts for a client in relation to the preparation of a new will. The proposed arrangements under the new will are complex and will involve a significant amount of work by the firm. For this reason, the firm has asked the client to pay £2,000 on account of costs. Six weeks have elapsed since this request was made and the client has not made payment. In the meantime, the firm has carried out a significant amount of work on the new will.

Our view

The key difference with Scenario 1 is that the client matter relates to non-contentious business. This means that Section 65(2) of the Solicitors Act 1974 will not apply.

In non-contentious client matters, a solicitor must make any requirement for a payment on account of costs, as distinct from disbursements, a condition of accepting instructions. Without this condition (or the client’s subsequent agreement), a solicitor cannot terminate a client retainer if the client fails to make a payment on account of costs. This should be considered at the outset of the retainer when contractual terms are being agreed with the client.

Consequently, whether or not the firm can terminate the client retainer for non-payment of costs on account will depend on the contractual terms it has concluded with the client in its terms of business or letter of engagement, particularly whether they allow it to request payments on account of costs from the client as a condition of accepting instructions and to terminate the retainer if these payments are not made.

Provided the firm has this contractual right, it should have good reason to terminate the client retainer for non-payment of costs on account, meaning it can terminate the retainer by giving reasonable notice to the client.

We consider it good practice for this notice to include a proposed way forward that would allow the firm to continue to act for the client, for example if they make payment of the sum requested by a specified date.

Including a proposed way forward is more important in a situation like this where the firm has already carried out a significant amount of work. Termination of the retainer can be expected to place the client in the position of having to find another firm to complete the remaining work at potential additional expense. The client should be given an appropriate period of time in which to respond to the proposed way forward.

The firm should take steps to mitigate any other risks to the client arising from the termination of the retainer. This might include helping the client to find a replacement firm and/or providing a handover note to this firm so that they can become familiar with the matter.

Case study 2 - failure to follow legal advice

A firm acts for a client in relation to a boundary dispute with his immediate neighbour. The client has alleged that the neighbour recently erected a fence encroaching on part of his back garden. The client and the neighbour are in dispute over the correct position of the boundary line, with the neighbour asserting that the new fence correctly reflects the boundary between the two properties.

The firm has reviewed the register of title for both properties and some old property deeds provided by the client and has advised the client that the neighbour has a good argument.

The firm has recommended that the client takes steps to settle the dispute, potentially through mediation with the neighbour, essentially to avoid the risks associated with legal proceedings. The client is unwilling to pursue this course of action and wishes to commence legal proceedings against the neighbour.

Our view

As a general matter, it is the client’s prerogative to decide not to follow legal advice provided by a solicitor.

In the absence of other factors, failure by a client to follow a solicitor’s legal advice would not usually amount to a breakdown in trust and confidence between the solicitor and the client justifying termination of a client retainer. Factors that might change this assessment (so that termination becomes justified on this ground) include where the client is behaving in an abusive way, for example by alleging that the solicitor is incompetent or corrupt.

Assuming there is nothing to indicate a breakdown in trust and confidence between the solicitor and the client, we are left with a situation in which the client proposes to reject the firm’s advice and instruct it to commence legal proceedings against the neighbour. In other words, the client favours a different strategy to that advised by the firm.

In a situation like this, the firm is obliged to follow the client’s instructions where it is satisfied that they have been properly given on a free and informed basis. This assumes that the arguments that the client wishes to make in any legal proceedings have some merit and are not bound to fail.

There may be scenarios in which the firm concludes that the arguments that the client wishes to make in any legal proceedings are so hopeless that they cannot be considered to be properly arguable. Where this is the case, the firm is likely to have good reason to terminate the client retainer in the event that the client refuses to change course (see paragraph 2.4 of the Code of Conduct for Solicitors, RELs RFLs and RSLs, paragraph 7.1(a) of the Code of Conduct for Firms and Richard Buxton (Solicitors) v Mills-Owens [2010] EWCA Civ 122).

Further help

If you require further assistance, please contact the Professional Ethics helpline.