UK: Professional Negligence and Indemnity: Surrender the Lost Cause

Last Updated: 14 September 2010
Article by Richard Harrison and Triona Fitzgerald

A recent Court of Appeal ruling giving solicitors the right to terminate the retainer of time-wasting claimants has been welcomed by many, but has also created uncertainty.

Solicitors wishing to terminate their retainer with clients intent on pursuing a hopeless case will draw comfort from a recent decision in which the Court supported the solicitors' decision to terminate their retainer with a client wanting to advance arguments which were not properly arguable.

Richard Buxton (Solicitors) v Mills-Owens (2010) concerned a statutory appeal against the grant of planning permission. Counsel had advised the client that the appeal could only proceed on the basis of a procedural or legal error by the planning inspector, and that only one of these grounds had a chance of succeeding.

But the client insisted that the case be argued on a wider basis by reference to the planning merits of the case and the safeguarding of the environment. The client eventually refused to approve a skeleton argument prepared by counsel. In light of the conflict with their client over how the case should be argued, the solicitors decided to terminate their retainer with the client and sought to recover their fees.

At first instance, Mr Mackay J held that the solicitors were not entitled to terminate their retainer as the client's instructions were not improper. Since they had not terminated for good cause, they were not entitled to recover their costs.

The Court of Appeal disagreed and held that what amounted to a "good reason" to terminate was a fact-sensitive question and that it was wrong to restrict the circumstances in which a solicitor could lawfully terminate his retainer to those in which he was instructed to do something improper. 

The Court stated that the desire to protect a client from arbitrary and unreasonable termination did not justify the narrow interpretation of what amounted to "good reason" to terminate.

The Court of Appeal went on to state that the applicable rules, taken together, should be understood to mean that solicitors were under a professional duty not to include any contention that they did not consider to be properly arguable in the court documents drafted, nor to instruct counsel to advance contentions that they did not consider to be properly arguable. 

The Court of Appeal also referred to rule 1.3 of the Civil Procedure Rules which requires the parties to help to further the overriding objective of enabling the court to deal with cases justly, which would not be furthered by the parties advancing hopeless arguments.

Interestingly, the Court remarked that, if an advocate considered that a point was properly arguable, he should argue it without reservation and, if he did not consider it to be properly arguable, he should refuse to argue it. He should not advance a submission but signal to the judge that he thought it was weak or hopeless by using the coded language "I am instructed that...". Such coded language, the Court added, was well understood as conveying that the advocate expected it to be rejected and should be avoided.

The rules arising from relevant codes/rules of conduct and case law which are likely to apply to a solicitors' decision to terminate a retainer are as follows:

  • Rule 2.01(2) of the Solicitors' Code of Conduct 2007 (the "Solicitors' Code") provides that a solicitor "must not cease acting for a client except for good reason and on reasonable notice".
  • Rule 11(3) of the Solicitors' Code provides that a solicitor must not construct facts supporting his client's case or draft any documents relating to any proceedings containing any contention that he does not consider to be properly arguable. 
  • The Bar Code of Conduct provides that a barrister must not accept any instructions that would cause him to be professionally embarrassed, which includes drafting documents or making submissions to the court containing any contention which the barrister does not consider to be properly arguable.
  • The Civil Procedure Rules (CPR) rule 1.3 requires the parties to help further the overriding objective, which extends to the legal advisers of the parties.

At common law, a solicitor may terminate his retainer on reasonable notice and if he has a "reasonable ground for refusing to act further for the client" per Lord Esher in Underwood, Son & Piper v Lewis (1894).

Where the parties have agreed in what circumstances the solicitor may terminate the retainer, then the matter is governed by contract and solicitors should review their standard terms and conditions before making a final decision.

For those solicitors faced with clients who will not pay their solicitors' fees, section 65(2) of the Solicitors Act 1974 deems a failure by a client within a reasonable time to pay a reasonable sum on account of costs of contentious business to be a "good cause whereby the solicitor may, upon giving reasonable notice to the client, withdraw from the retainer".

The Court of Appeal acknowledged that it will always be difficult for solicitors to draw the line between an argument which can be properly articulated which a client wishes to put forward, albeit with little chance of success, and an argument which cannot properly be articulated and which it is believed is bound to fail. In the absence of a comprehensive definition of what amounts to a "good reason" in the Solicitors' Code, solicitors must therefore make their decision based on the facts of a particular instruction. 

Some additional assistance is offered in the 1999 guidance to the Solicitors' Practice Rules 1990 and guidance to the Solicitors' Code which indicate that "good reason" may be where the client has given no clear instructions or where there is a serious breakdown in confidence between solicitor and client.

To avoid clashes with clients, solicitors should endeavour to manage their client's expectations from the outset, setting out, if at all possible, the relative strengths and weaknesses of the arguments they wish to pursue. The introduction to Rule 2 of the Solicitors' Code states that it is designed to help both solicitors and their clients understand each other's expectations and responsibilities.

Regular updates on an ongoing basis to clients are also advisable, particularly following key stages in the dispute. Such updates should go some way to preventing the creation of unrealistic client expectations.

In particular, solicitors should also try to explain technical legal issues as clearly as possible early on in order to avoid potential misunderstandings. Such advance warning of pitfalls in the client's legal arguments is key to avoid solicitors finding themselves in conflict with their client over how the case should be argued.

Having said that, however well the client is briefed, there is always the possibility that the strength of its case may weaken during the course of the proceedings due to, for example, the emergence of new evidence. In addition to discussing such developments with counsel and clients as soon as possible, it is important that any warnings and/or advice given to clients is recorded in writing if possible and that solicitors make contemporaneous notes of their misgivings, in order to be well placed to defend their reasons for terminating. 

Solicitors may also consider seeking a second opinion on the merits of the case from counsel, which again would ideally be recorded in writing. Buxton does not however offer an easy route for solicitors wishing to terminate the retainer at the eleventh hour. Aside from the question of why the difference of opinion between solicitor and client had not come to light at an earlier stage, in litigious matters the guidance accompanying Rule 2 is clear that it will normally be unreasonable to stop acting for a client immediately before a court hearing where it is impossible for the client to find alternative representation.

In such circumstances, the court will step in to protect the litigant. There can be no doubt that solicitors are in an unenviable position if they and their client do not concur over how the case should proceed. Terminating the retainer without good reason exposes the solicitor to the risk of non-payment of fees and/or a claim by their client for loss of the chance to bring their case. 

Not terminating and simply following the client's instructions risks the solicitor being in breach of the relevant rules and codes of practice and his obligations to the court, and possibly an order for wasted costs if the assistance the solicitor lends amounts to an abuse of court process. 

Unfortunately, there is no easy solution, but following the precautions suggested should at least mitigate the risk of adverse consequences in the event that the solicitor does decide to call it a day.

This article was first published in Legal Week on 5 August 2010.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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