Firm which terminated retainer without notice on closure “cannot claim fees due”

A law firm’s decision to terminate its retainer without notice to the client – because it was closing down – was unreasonable and it could not claim the fees due before then, the High Court has ruled in overturning a master’s ruling.

The appeal in Gill v Heer Manak Solicitors [2018] EWHC 2881 (QB) concerned solely the question of whether the defendant law firm had good reason to terminate its retainer without notice because it was closing at the end of December 2013 after failing to secure professional indemnity insurance.

Under changes to the rules for solicitors’ firms that year, firms that had not obtained insurance by 1 October were given 90 days to do so or effect an orderly wind-down.

The closure came a week after a case management conference in Mr Gill’s matter. The claimant’s file was passed on to another firm to which the conducting fee-earner had moved, but the client was only told of this on 4 February 2014.

The Heer Manak retainer provided: “We may decide to stop acting for you only with good reason, for example, if you do not pay an interim bill or comply with our request for a payment on account. We must give you reasonable notice that we will stop acting for you.

“If you or we decide that we will no longer act for you, you will pay our charges on an hourly basis and expenses.”

At first instance, Master Simons found that Heer Manak had acted reasonably because it had done what it could in the situation.

He said: “I ask myself at any time would it be commercially sensible for solicitors to warn their client that they might be closing down because they cannot get proper professional insurance.

“It seems to me that solicitors would be running a very high risk by telling every client that there is a risk that we might be closed down, but we have to give you reasonable notice…

“One has to look at the way the solicitors behaved. They did not give notice… It was not until the very last minute, two days before the period they were given by the Solicitors Regulation Authority for them to stop the firm from trading, [that] they said they were closing down.

“One has to look at what they then did. They informed the client on their website that the client had to go and get other solicitors, this is the procedure… and the defendant would make arrangement with these new solicitors.

“The defendant in this case, once it was contacted by the new solicitors, passed the document on without demanding any payment of their fees so that the client could continue with his case.

“So I do not accept the submission that no reasonable notice was given in the circumstances of this particular case.”

Mr Justice Walker, sitting with Master Haworth as assessor, found that the claimant client had been left “in the lurch” by Heer Manak, facing “very substantial litigation with a considerable amount of money at stake” and much work to be done by the end of April 2014.

It was accepted on behalf of the firm that the objective test for reasonableness involved looking at the point view of both sides and balancing their interests, and Walker J said Master Simons had failed to consider the position from Mr Gill’s point of view.

“As it seems to me, in this regard the master erred in law,” he ruled.

Emphasising that the firm had filed “no relevant factual evidence”, the judge said there was no reason to think that the firm could not have closed in an orderly manner, as others did: “The course it took, giving Mr Manjit Gill no notice at all, can hardly be described as ‘orderly’.”

Walker J rejected the suggestion that the letter of 4 February was satisfactory: “There was no indication that the transfer made of the file was to a firm which could be expected to have the expertise necessary to advise Mr Manjit Gill.

“I add, although it is not necessary to my decision, that it is difficult to see that the firm had any authority to transfer the file in the way that it apparently did.

“More generally, however, the submission gives no weight to the potential difficulties for a person in Mr Manjit Gill’s position. He was left without cover during a period when there might have been significant developments in the litigation, and in any event when a tight timetable had been imposed at the case management hearing on 20 December.

“Termination of the retainer without notice occurred during the holiday season. I have no doubt that a reasonable observer would have appreciated well before 27 December that termination without notice would risk putting in jeopardy Mr Manjit Gill’s ability to comply with that timetable.

“For all these reasons, I conclude that the master was wrong to hold that the retainer could be terminated with no notice.

“That being so, it necessarily follows that in the present case the firm was not entitled to terminate the retainer and cannot claim the fees which it sought in the proceedings before the master.”

Robin Dunne (instructed by Deep Blue Costs) for the claimant/appellant; Andrew McGee (instructed by Maya and Co Solicitors) for the defendant/respondent.

 

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Published date
01 Nov 2018

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