Retainer letters – a two edged sword?
Retainer letters – a two edged sword
Solicitors are now required – by law – to provide their clients with a letter of retainer at the commencement of their instructions. This letter sets out the terms and conditions upon which they provide a service. In effect it represents your contract with the solicitor.
Now this is a very good thing. I have used retainer letters for over 15 years and long before the practice became compulsory because it introduces certainty into your dealings.
But as a client you really have to be very careful because signing a retainer letter could turn out to be the equivalent of signing a blank cheque. I recently read the terms of business of one solicitor which is contained on his firm’s website. His terms of business are simple – he will charge £200.00 per hour but he cannot specify how many hours it will take to complete the work.
Solicitors will commonly tell you that if you win your case the other side will pay your legal costs – but this is not necessarily always the case and there are very complicated costs rules to be considered.
In the County Court (which deals with the majority of civil cases) fixed legal costs apply. This means that even of you win your case you can only recover a certain amount of money. Say, for example, you take a legal case through Court and win it and you are awarded £10,000.00. You will be able to recover £2,319.00 legal costs. Now what if the solicitor above takes 35 hours to bring your case to a conclusion – and 35 hours in some cases is not an unrealistic time scale – your bill would then be £7,000.00 (plus Vat).
I experienced a similar situation recently. In this case the solicitor charged £140.00 per hour to the client. He took instructions, carried out all the preliminary work necessary, prepared legal proceedings, issued them through Court and served them on the clients opponents. On receipt of the legal proceedings the opponent immediately paid the full total of the financial claim being made. This might seem like a result but the only costs which the client could recover from the opponent was £186.00 or just over an hours work – and there was considerably more than an hour spent in preparing the case.
It is therefore vital that the client should question the implications of any letter of retainer before signing it. It is a vitally important contractual document.