Updated: Jan 7
Solicitors in private practice are just like any other business. They provide a service and render a bill when the job is done. They have one job or repeat jobs. They may trade as sole practitioners, partnerships, LLPs, or companies. They are professional service providers who are highly regulated, and they must follow certain rules in the recovery of their professional bills.
From time to time, like many other service providers, solicitors will encounter a client who refuses to pay their bill or just does not engage with them in how to pay the bill, and they have to consider suing their client.
As Shergroup has its own law company, Shergroup Legal, we understand how this leaves a solicitor feeling uncomfortable. There is a delicate balance between keeping a client happy and taking the path of having to sue for what is owed.
But solicitors in practice are no different from other business owners. Cashflow is king and it must be looked after. Solicitors can take comfort from the fact that the law and their professional body anticipate that debt recovery action will need to be taken from time to time, and statute and professional conduct rules support this action if this is the case.
The Debt Recovery Process for a Solicitor’s Bill
If solicitors are owed fees, they are entitled to follow a debt recovery process to recover what is due to them. In doing this their professional body, The Law Society of England and Wales, has set out a clear way forward on what a solicitor must do at the start of his or her retainer to ensure that suing for fees ticks all the practice points.
The most important thing solicitors must do is to anticipate that at some time in their professional life a client will not want to pay their bill for either non-contentious or contentious legal services. This the same for most service providers and solicitors are in the same boat as everyone else to that extent.
There are complexities with solicitor’s suing their clients that other professionals may not encounter. The purpose of this article is not to go down into great depth on what stops a solicitor suing. Instead, we look at a situation – contentious or non-contentious – when a solicitor has an unpaid bill, and the client is just not engaging about when it is going to be paid.
Setting Out Terms of Business in the Client Care Letter
To put themselves on very firm ground solicitors should be sending a client care letter to their clients at the start of their retainer which sets out their terms of business. This retainer may be for one job, or for repeat jobs or designed for a more complex retainer. In any scenario, the solicitor must have informed the client about how the legal services must be paid for. These terms should include a paragraph on what happens if the client refuses to pay any bill rendered.
The client care letter is also the perfect place to remind a client that if it becomes necessary to use a collection or legal service to collect a debt, then the cost of recovering a debt will be added to the amount due. If this is missing from your client care letter, we encourage you to update your terms, so this is included.
To ensure there is no confusion that the client care letter was received, solicitors should ensure the terms are acknowledged and signed with the signed copy being attached to the client file.
Sending the Bill
When it comes to sending a bill for legal services from the solicitor to the client then the bill should comply with the requirements of s69(2) of the Solicitors Act 1974. This provision deals with the timing of sending a bill and ensuring it is signed. So, if those boxes are ticked recovery proceedings for costs may be commenced one month after the date of delivery of the final or interim bill.
Within Section 69(1), there is also a provision for a solicitor to shorten the time for sending a bill before a month is up if the solicitor believes that the client is about to quit England and Wales, become insolvent, or do something which would intend to delay or avoid payment.
Pre-Action Debt Protocol Considerations
Where the client is an individual (as opposed to a company or partnership) any decision to sue the client will be subject to the Pre-action Protocol for Debt Claims (see Pre-action Protocol for Debt Claims (PDF 460 KB).
Paragraph 3 of the protocol requires that before commencing proceedings, a claimant should send the debtor a letter of claim containing detailed information about the debt as set out in para 3.1 of the protocol along with:
an up-to-date statement of account or other information set out the up-to-date position on the debt, interest, administrative charges, and payments received
an information sheet in the form set out in annexe 1 of the protocol
a reply form also set out in annexe 1 of the protocol, and
a financial statement in the form set out in annexe 2 of the protocol
To the uninitiated in the debt recovery process, this may seem like a big task to collect a small debt. However, if your unpaid bills are mounting up and there is no plan to collect them in, then Shergroup can offer you an outsourced service to focus on pulling in this cash as a straightforward process.
A Complaint on the Horizon?
A client care letter should set out what to do if a client has a complaint. The Solicitors Code of Conduct states that solicitors must ensure that clients are informed in writing at the outset of the matter of their right to complain and how complaints can be made.
All complaints, including a complaint about a firm's bill, must be handled promptly and fairly. A solicitor will be prevented from issuing recovery proceedings for costs where the client has made an application to the court for a detailed assessment of the costs within one month of delivery of the bill or where he has obtained an order for the bill to be assessed – see ss70(1) and (2) Solicitors Act 1974.
Interest on Costs
Article 5 of the Solicitors‟ (Non-Contentious Business) Remuneration Order 2009 deals
with interest payable on unpaid costs in non-contentious matters and entitles the solicitor to charge interest from one month from the delivery of the bill of costs.
Unless otherwise agreed with the client, the rate of interest will be 8% per annum. This has been the interest rate on judgment debts since 1 April 1993 (see Judgment Debts (Rate of Interest) Order 1993 SI 93/564).
Service of A Statutory Demand
Practitioners faced with a client who will not pay may consider serving a statutory demand on the client. However, solicitors should proceed with caution.
A solicitor can serve a statutory demand within one month of delivery of a bill and can, after the expiration of one month from the delivery of the bill, issue a bankruptcy petition provided 21 days have expired from service of the statutory demand.
A petition, but not a statutory demand, is an 'action' within the meaning of s69 Solicitors Act 1974.
In general, solicitors should be wary of following this route as there is a power to set aside a statutory demand on the grounds of injustice. See Re a Debtor (No 88 of 1991)  4 All ER 301; Marshalls (a firm) v a debtor  Ch 286 (also reported in The Independent 10.07.1992) and Shalson v DF Keane Ltd  EWHC 599.
Solicitors should be mindful of the decision in Turner v Palomo (1999) 4 All ER 353 CA,
which held that a solicitor‘s claim for non-payment of fees should be treated as a claim for an unspecified amount until those fees have been assessed by the court. The same reasoning was applied in Truex v Toll  EWHC 396 (Ch). On this basis, there may be no right to serve a statutory demand until costs have been assessed.
Personally, we think the service of a statutory demand for solicitor’s costs creates more problems than a simple money claim. A money claim gives a client a clear signal that the solicitor is the intent of recovering what is due, but it gives some breathing space and time for a client to raise a Defence/Counterclaim before judgment is entered.
Mediation as an Alternative to Suing
If you are looking to recover your money in a more controlled setting, mediation may be a way forward. For larger outstanding bills and situations where you want to avoid confrontation with a client, mediation could be the answer.
The process of discussing and resolving issues about service can be carried out by a mediator who is skilled in managing disputes without inflaming a situation.
If you would like to explore this option using Shergroup’s own Mediation Service, please contact Shergroup’s Business Solutions Advisors for details.
The Money Claim and On to Judgment
Over the decade we have been successfully helping law firms recover what is due to them in a low key and discreet way, following all the advice we have given above.
Issuing a money claim is straightforward and provided all the other steps have been taken, it will focus the mind of the client to pay your bill, or be on the end of a County Court Judgment (CCJ).
In choosing Shergroup Legal to recover your bill, you come to a firm with its own Authorised High Court Enforcement Officer, who can instruct enforcement agents to attend at a client’s address to enforce payment using the well-worn method of a Writ of Control. We hope it will not get to that stage.
No solicitor finds this area of law easy even though they are lawyers. Yet the nettle of unpaid bills on the ledger must be grasped!
If you find yourself wanting to outsource this process to fellow professionals who understand your concerns, then talk to us at Shergroup about how we can solve this problem for you. All conversations are strictly confidential – as you would expect from fellow practitioners and we will look at your options for your practice and see if a phone call or email to your client will get you paid quicker than you can do it yourself.