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The High Court decision of Rosenblatt v Man Oil Group SA  has highlighted the importance of setting out clearly in the client retainer the process of agreeing any increase in costs and then abiding by the stated process.
In this case, the solicitors set out in the client retainer a number of assumptions on which the fixed fee was based and stated that they reserved the right to review the fixed fee if it transpired that any of these were not correct.
The assumptions indeed proved incorrect and the solicitors notified their client of the significant increase in costs on a number of occasions. However, it was only at a meeting some time later that full details of costs incurred to date, the anticipated future costs and a proposed new fixed fee were provided to the client.
The Court noted that the retainer included an option to review the costs, but that it did not set out the process for doing so. It was therefore correct to imply that this was on the basis that the client was notified that the solicitors were exercising their right to increase their costs and that the client was provided with accurate fee information. It was only at the meeting that all of this information was supplied to the client. Consequently, the practice was unable to recover anything above the fixed fee for work done up to meeting, but (subject to any other agreement between the parties) any work done after the meeting was recoverable at the hourly rate specified in the original retainer.
The relevant regulatory obligation set out in the SRA Code of Conduct is in Outcome (1.9): clients receive the best possible information, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of their matter.
Action: it is not sufficient to ensure your client care letter/terms of business set out clearly any assumptions/provisos on which the fee agreement is based, unless they also specify the process for agreeing an alternative fee AND the stated process is actually followed.
Examples of the process for any increase in costs could include that it will take effect immediately or on a number of days' notice in writing, be subject to a further written estimate and/or subsequently be on a fixed fee or an hourly basis.
Client Relationship Manager
T: 0845 056 3949
M: 0743 727 4046
The Law Society has issued a practice note about the risks to solicitors posed by this new legislation, which came into force on 30 September.
The SRA has urged all practices to check HM Treasury’s consolidated list of asset freeze targets, which lists designated persons subject to financial sanction under EU or UK legislation.
The practising certificate renewal period opened on Monday 2 October.
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