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Solicitors lose right to fees after ending retainer “peremptorily”

Fees: Firm should have investigated more

Solicitors who terminated their retainer “peremptorily” without investigating the circumstances of evidence that might have thrown the case into doubt have lost their claim to £8,000 in fees.

It is the latest successful challenge brought by CheckMyLegalFees, the business that specialises in contesting solicitors’ bills on behalf of former clients.

Gallacher v Emerald Law was a holiday sickness claim brought by a couple and their daughter after they became ill while on an all-inclusive holiday in Spain.

The conditional fee agreement made clear that the solicitors could cease to act and seek their basic charges if they reasonably believed the case was fundamentally dishonest or the clients had provided misleading or inaccurate information.

The fee-earner told the claimants that she had assessed their claims as having a greater than 51% chance of success on the basis that they did not eat or drink anywhere other than the hotel complex before or after they became ill.

However, District Judge Bellamy in Sheffield described this as an “interesting analysis” that did not accord with the witness statements, which were ambiguous on the point.

Some time later, bank statements obtained by Mr Gallacher showed that he went out for a meal two days after his symptoms started.

The fee-earner’s attendance note on a conversation with him that followed said this raised credibility questions. “Advised initial instructions state only ate food in hotel complex. Medical report says rest of holiday was ruined.

“Witness statements of Elaine and Rebecca say not able to leave hotel complex to eat elsewhere due to illness and claim was assessed as having sufficient prospects on this basis. Advised client would more than likely no longer be able to proceed with case and would be sending them a bill. Client understood issues and asked to keep him updated.”

DJ Bellamy described this as “a staggeringly short note of a telephone call that effectively ends the retainer, or purports to end the retainer, for a case that has been going off for 18 months where there has been an investment of costs of around £17,000”.

This was especially as the fee-earner had appeared not to make an enquiry of the circumstances in which the claimants went for food.

“There is no analysis during that phone call by the solicitor to her client about the steps to be taken in proving a claim for breach of duty, the causation and then the quantum.

“It seems to be solely based on the fact it brings into doubt their [credibility]. I have not been shown any file note nor note of any discussion, say for example, with the principal of the firm saying: ‘We have got this CFA signed up, this is the state of evidence. We are about to issue proceedings, in fact we have sent them to the court, do we go ahead’?

“A decision to terminate is taken. In discussion I used the words ‘knee jerk reaction’ and that remains my view, that there is no evidence of due consideration to the impact of this evidence upon the case, does it materially affect, does it, therefore, reduce the prospects of success below 51%?”

The judge said the impression that this was a “knee jerk reaction” was enforced by the solicitors’ demand for nearly £8,000, with “no breakdown, no draft bill, no information as to how that sum is made up” and a demand for payment in 14 days.

“It seems to me that in all the circumstances that is an extraordinary letter to write to a client at that stage.”

The judge said that, with proceedings yet to have started, the fee-earner should have taken detailed instructions and then reconsidered her assessment of the prospects of success, “given reasons for it and then come to her decision”.

He continued: “It goes without saying that peremptory termination of the retainer, which is what I find, is clearly not a termination on reasonable notice.

“I can in my judgment, and there is no assertion that these are dishonest claimants, find at best, on the evidence before me, this is an innocent oversight which as soon as it comes to the attention of Mr Gallacher he endeavours to correct.”

DJ Bellamy concluded that the retainer was terminated “peremptorily” by the solicitors, rather than as a result of any dishonest or misleading information which would justify ending it.

“If anything, it is on the basis that the solicitors felt the prospects of success may have gone below 51%, but that is an assumption that I am making not based on evidence.

“The reality is this was, as I have said before, an ill-thought through reaction and it follows, for those reasons, that the Gallachers cannot be held liable for any incurred costs under the terms of the CFA.”