How good are you at managing your legal practice retainer agreements?

A significant portion of claims against lawyers are attributable to poor retainer management and client communications.
In Australia disclosure at the onset of a lawyer-client relationship is governed by the Legal Profession Acts.


What lawyers may find odd is that the standard does not cover all matters that a lawyer must disclose under the Legal Profession Act 2008 (WA) (the Act). The editors of the standard have some catching up to do.

How do you ensure that you have disclosed the minimum information required under the your Legal Profession Act and that your cost agreement is kept up to date throughout the life of a legal matter?

Drafting and subsequently maintaining your retainer agreement  is not a formality but a risk reduction opportunity providing you with a platform for better communication with your clients.
To ensure that your practice has a consistent approach in relation to costs agreements a written process covering drafting and post-execution will be needed.
The process will be only valuable if it is communicated to all professional staff and included in the induction program for new lawyers.

Whilst lawyers practicing in Australia are not obliged to enter into costs agreements with their clients costs disclosure is mandatory in all matters in Western Australia where legal costs, excluding disbursements, exceed $1,500.

The effect of failure to disclosure are set out in section 268 of the Act.

There are two aspects to managing risks associated with a retainer agreement:

• ensuring compliance with legislative requirements
• maintaining an up to date retainer throughout the life of the legal matter. 

Legislative compliance

The disclosure requirements under the Legal Profession Act 2008 (WA) include:

• s 260 Disclosure of costs to clients 
• s 261 Disclosure if another law practice to be retained
• s 262 How and when disclosure must be made
• s 263 Exceptions to requirement for disclosure
• s 264 Additional disclosure - settlement of litigious matters
• s 265 Additional disclosure - uplift fees
• s 266 Form of disclosure
• s 267 Ongoing obligation to disclose
• s 270 Disclosure to associated third party payers

Requirements under LAW 9000 - legal best practice standard

Most of the standard's disclosure requirements are covered by the legislation. Here is the list of matters that should be disclosed to a client:

• the scope of the work and services that the practice has agreed to provide
• the services that will not be provided by the practice
• the time that the matter is likely to take to finalisation
• the basis of charging and likely costs, including third party fees and charges, court charges, government charges and costs incurred by the other party
• the likely outcomes 
• dispute resolution procedure
• the practice specifies that it can to fulfill the terms of engagement
• responsible persons for handling the matter 
• substantial changes to disclosure
• any conflicts of interest are identified and a course of action are negotiated with the client 
• the client is advised of any cost recoveries which may arise
• circumstances under which the agreement may be terminated
• retention of client's documents at the end of the matter.

Wha is the client going to do tasks.

Drafting a retainer agreement

The contents of a costs agreement may be an issue, for example failing to set out the scope of legal service, but
There are steps that are to be taken before, during and after the completion of the matter.

Before drafting the retainer:

• you would have taken client's instructions. For an example of a comprehensive fact finding form for family law clients see the embedded form or the online version of the same form.

• you would have ascertained whether the matter is in an area of law in which the firm currently practices extensively. This will be determined by the practice's engagement policy.
• you would have identified your client.
• you would have done a conflict of interest check. An example of a conflict of interest policy and procedure follows.

After executing the retainer:

Do you keep records of your correspondence relative to the establishment of the terms of engagement?
Do you seek a written acknowledgment from your client that he or she understands the terms of engagement?How do you ensure that you get a signed copy of the retainer or that the client has agreed by other means?

What do you do with the signed retainer?

What do you do with evidence confirming agreement by client?

How do you handle variations to the terms of engagement?
Do you communicate with your client in a timely manner any changes in the terms of the retainer?

How do you inform client that if need for variation arises other aspects of the agreement may have to be
reviewed not only those directly affected by the variation.
Exclude financial and accounting advice.

when the retainer is at an end and whether anything has to be done in the future and who will do it.
How do you manage retainer creep?
Unless you are a tax advisor carve-out regarding tax issues (strictly adhered to by the practitioner) to help avoid misunderstandings that the practitioner was retained to give tax advice.

The client should be informed in any covering letter accompanying the disclosure document
that any estimates provided are only estimates and not a quotation and, therefore, subject to
change.

In summary

Most problems with retainers could be avoided through better communication by the lawyer. 

Lawyers who have attended a seminar on risk management of retainer and cost agreements are unlikely to be surprised by the LAW 9000 standard regarding terms of engagement.

Terms of Engagement

The standard terms of engagement or retainer agreement between a law practice and its client should include a written and signed authority from the client to destroy the client's file in accordance with the firm's usual practice.

If a charge is to be made, the client should be informed of the charge in advance and it would be appropriate to include such matters in the retainer agreement or terms of engagement.

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