GUIDANCE TO LAWYERS CONSIDERING ACTING UNDER A LIMITED RETAINER

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1 INTRODUCTION This practice briefing is intended as a guide to good practice for lawyers undertaking limited retainers (also known as unbundled legal services). While intended to encourage lawyers to consider offering limited retainers, this briefing is not legal advice. It is hoped lawyers will benefit generally from the guidance contained in this practice briefing, but as always each lawyer must apply her/his own professional judgement in determining how and in what circumstances to offer unbundled legal services. What has been described as a justice gap is emerging between those who can afford to pay for traditional legal services and those who cannot. One suggested means by which lawyers can address this growing justice gap is through the provision of limited or unbundled legal services, in particular to clients who are at least partly represent themselves in court. Litigants in person, self-help and DIY law? While accurate statistics are only beginning to be gathered, it seems at least anecdotally clear that an increasing number of claimants and defendants are electing to represent themselves during legal proceedings. More litigants in person (LiPs) are appearing before the courts, and more individuals with perceived legal issues are demonstrating a preference toward taking greater control over their own legal affairs at least partly because of inhibiting legal fees associated with instructing a lawyer under a traditional, usually hourly-billed, retainer. This do it yourself law culture is encouraged by the growth of self-help legal websites, community services, and information/form databases (for example; LawSpot, JustAnswer NZ Law, and various 0800 legal advice lines). Elements of self-help and the limited retainer service model are not new. For example, executors may frequently request a lawyer to apply to the court for probate in the administration of an estate, but then carry out the rest of the legal work involved themselves. Limited service retainers are increasing in the field of family law, where recent changes to the legal aid system make limited representation in the Family Court the norm,

2 and have been the normal means of delivering service for duty solicitors for many years. Community Law Centres also provide limited advice on defined issues. Assisting LIPs to prepare initial pleadings and affidavits, or to better understand court procedure and strategy, may assist the judiciary and opposing counsel by reducing additional administrative and ethical concerns the court must consider when conducting proceedings involving a lay litigant. Encouragement of do-ityourself solutions for clients who are willing and capable of taking greater control over their legal affairs can help to alleviate not only the financial strain on families and individuals in need of legal services, but also administrative strain felt by the wider legal system. Why aren t limited retainers more popular and widespread? Unbundling your legal services for your clients can be risky. Because clients remain in charge of their own legal issues, responsible for proceeding their case themselves, there is a risk that they will be required to make decisions about legal matters with which they are unfamiliar. And, as the lawyer s access to relevant information about the matter depends at least to some extent on the quality of information given to them by the client, there is potential for counsel to make incorrect assumptions about the facts. A lawyer engaged under a limited retainer may not be in a position to provide complete advice to their clients where there is an unresolved factual dispute, or if the client omits to advise counsel of a crucial fact. Further, there is potential for limited retainers to cause confusion between client and lawyer about the scope of the work do be done, and who is responsible for each discrete element of the wider legal work. Confusion as to responsibility/limits on liability could lead to dissatisfied clients, complaints and potential professional negligence claims. In the USA, limited scope retainers have been growing in popularity for some time. They are seen as an affordable option a more cost-effective means of accessing legal services. There is not yet any New Zealand case law on limited retainers, however a recent decision of the United Kingdom Court of Appeal held that lawyers do not have a broader duty of care when offering unbundled services. This year, the Court in Minkin v Lesley Landsberg [2015] EWCA Civ 1152 threw out a professional negligence claim brought by a client against a family lawyer, with Lord Justice Jackson saying that solicitors acting under a defined limited retainer do not owe a broader duty of care to clients that goes beyond the terms of the retainer. Jackson LJ stressed that, where unbundled services are offered and limits of liability are clearly defined, a lawyer will not be held responsible for issues arising in relation to the client s legal proceeding but outside of the lawyer s scope of responsibility. What are the potential benefits for lawyers? Increasing market share while also addressing the legal profession s commitment to facilitating greater access to justice for those who struggle to pay for legal services on a general retainer basis. A potential source of clients who want and are able to handle their legal affairs themselves, but are willing to pay for limited expert guidance on the more complex procedural or legal issues. Page 2

3 Improving the quality of legal services by focusing on efficiency and the client s core legal needs. More affordable and predictably-priced legal services for clients, which inherently increases satisfaction and reduces complaints. Fewer unpaid legal bills and associated debt recovery many bills might be paid in advance, or via other alternative billing methods. Enhanced job satisfaction for lawyers who may not enjoy the full-scope practice model and who want to reduce the demands on their legal practice. Lawyers with family responsibilities might be able to work parttime, or from home. This may reduce professional stress and increase job satisfaction. A reduction in fee-related complaints. Many complaints are about perceived excessive fees. Lawyer s conduct complaints often accompany these, sometimes for justification purposes. A limited scope retainer can reduce client dissatisfaction, as consumers know clearly what they are and are not getting. Clients are less likely to blame their lawyer for any disappointment arising from the outcome of their legal issue. Greater ability to manage client expectations and enhance clients perceptions of value retained and received. What are the potential benefits for clients? Under limited service retainers, where an individual maintains primary responsibility for overseeing and executing their legal proceedings, clients are provided affordable access to expert assistance in matters that they cannot confidently or capably perform themselves. The general public expect lawyers to be innovative in the provision of their legal services, which might involve new billing structures and business models. Generally, benefits include: Expert legal assistance that can help a client navigate a system that is often complex and difficult for a lay person to understand. Clients are empowered. They have more control over their own legal affairs, and do not need to rely solely on their lawyer. Clients can exercise control over those parts of the file in which they feel comfortable handling. More affordable legal services. Clients can expect a smaller legal bill than that typically incurred under full-service representation. This may be due to less time being required of the lawyer under an hourly-billing scheme, or alternative fee arrangements agreed in advance. Greater ability for a wider section of civil society to access the justice system to resolve their legal disputes and/or issues. Examples of legal work amenable to limited retainers The following is a non-exhaustive list of areas of law where it might be appropriate for a lawyer to offer services under a limited retainer. The list is indicative only, and not-intended as a substitute for each lawyer s own professional judgement. In all cases, the practitioner must consider the appropriateness of unbundling their Page 3

4 services by having regard to the circumstances of the case, the client, the complexity of issues involved, and the relative risks and benefits (to the client and lawyer) of limiting any given retainer. Drafting of initial pleadings and affidavits. Participating in one-off court appearances, such as: conducting interlocutory applications, appearing in pre-trial or case management conferences. Advice on grounds for and likely success of an appeal. Strategic advice regarding a specific stage of the legal process, such as the filing of an initial application or statement of defence. Applying for probate in an estate administration. Reviewing a single document such as a lease, contract or agreement for sale and purchase. Providing one discrete piece of advice within a larger legal matter, for example checking a letter to be sent to an employee in an employment dispute, or undertaking a health and safety review or privacy policy. Document review, preparation and/or filing. Factual investigations, within defined limits. Coaching a client to appear in court on their own behalf, or to present a case to the Disputes Tribunal. Providing guidance on how to independently instruct an expert. Settlement negotiations and conferences, mediations, or other types of clearly limited dealings with the opposing party. What are the risks for lawyers? Allegations of professional negligence, arising from insufficient knowledge of the client s factual situation. Allegations of professional misconduct in relation to client care responsibilities, duties to the court, and possible third parties. Confusion, due to failure to fully explain to the client the extent and limitations of the unbundled services being offered. Unintentionally creating a full retainer, and attracting the consequent liabilities. Non-compliance with professional indemnity insurance terms. Complaints Lawyers owe a duty to apply the relevant degree of skill and exercise reasonable care in carrying out legal tasks they have undertaken to complete. Although the contract between lawyer and client, the retainer, is an important factor in determining the extent of and limits to the duty of care owed, there remains a risk that Page 4

5 the scope of the duty might be more widely defined by a court asked to determine allegations of professional negligence (although, see UK Court of Appeal case Minkin). Lawyers must be mindful that a duty of care can in some very limited circumstances extend to third parties. It is essential that lawyers engaged under limited retainers clearly express what is covered by the contract for legal services and what is not, so there can be no ambiguity or alleged misunderstanding. Lawyers also have an overarching duty to act in the best interests of their clients. Therefore, a lawyer should not agree to work under a limited retainer in circumstances where in their professional judgment it is inappropriate, either because of the complexity of the legal circumstances or the client s ability. Best practice for a lawyer considering acting under a limited retainer: A lawyer should advise the client honestly and openly about the nature, extent and scope of the services that the lawyer can provide and whether the services can be provided within the financial means of the client. Ensure the client understands that the retainer is limited and understands the associated risks to the client and the lawyer. Not all clients are equal. A longstanding, sophisticated corporate client presents very different considerations for unbundling than that of a first-time family law client. Rules of Conduct and Client Care Chapter 4 of the Rules of Conduct and Client Care concerns the availability of lawyers to the public, retainers and sets out what is considered good cause for refusing to accept instructions and for termination a retainer. Rule 3.5(c) states that any provision in client care information that limits the extent of the lawyer s obligation to the client or limits or excludes liability must be fair and reasonable having regard to the nature of the legal services to be provided and the surrounding circumstances. Is it appropriate to offer this client limited services? Subject to the rules, the ideal client for a limited retainer to work effectively is one who is: Self-motivated. Willing and able to handle paperwork, details and follow through where required. Able to gather and analyse financial information. A good communicator. Able to make decisions Has sufficient time to perform the delegated tasks. Reasonably proficient in written and oral English. Not suffering from any emotional or mental disorder. Page 5

6 Clients who cannot understand the limits of the representation and associated liability, or who may not be able to perform delegated tasks, may not be appropriate clients to whom to offer unbundled services. Limiting the scope of representation does not mean that a lawyer s general fiduciary duty is lessened. Lawyers cannot contract out of fundamental ethical obligations. Lawyers must still meet a required standard of care, competency and confidentiality. And this remains the case even when legal work is undertaken on a pro bono agreement. Risk management strategies for the lawyer: A limited retainer is not much different from a traditional retainer in terms of the general risk management practices a lawyer should employ. However, one added risk stems from the possibility that the client may not fully understand the limits on the lawyer s responsibility under the unbundled retainer, and may not be able to competently complete their own tasks. Well-documented and clear client communication is the best way to reduce risk. Take the time to properly communicate fees and disbursements, expected outcomes, unexpected contingencies and actively listen to and ask your client questions. Be explicitly clear about who is to be responsible for what particular task and be proactive to ensure that the client is performing their tasks when there are intersecting roles. A client s failure to perform certain tasks may put the lawyer at risk. A practical checklist might include the following: Do not accept a limited retainer for a matter that you would not feel competent to handle in its entirety. Discuss the client s eligibility for legal aid. If they are eligible discuss this with them in the usual manner. Conduct a thorough initial interview with the client and assess how appropriate a limited retainer is in the circumstances. Does it preclude a full legal analysis of a matter where you consider that to be important? Understand and record the goals of the client. Consider the nature of the matter. Is it too complex for a limited retainer? Check things out have you avoided making assumptions? Put in place clear and documented parameters relating to the commencement and conclusion of the retainer. If there are disbursements to be paid, agree to who will be responsible for paying for these in advance. Ensure the client care information provided is tailored to the limited retainer and is explicit with no room for misinterpretation. It must cover all of the requirements of rule 3.4 and the rest of the Rules of Conduct and Client Care. Ensure you have all the relevant information. Be alert to changes in the background circumstances inquire at regular intervals. Page 6

7 Try to stay within the scope of the retainer otherwise this could create uncertainty and ambiguity. Ask the client to sign and return the terms of engagement stating that they have read and understood the terms. Ensure the client is aware of any potential cost liabilities to other parties, and the prospects of recovery. Report to the client regularly. If your client is self-representing in part, consider referring them to useful information on the Ministry of Justice website, including a resource on courtroom terminology; and a general resource on self-representing; justice.govt.nz/courts/representing-yourself/index. Advise staff in your office who are involved with the file about the extent of the limited retainer. Include a dispute resolution mechanism or procedure for handling complaints. Address these immediately they arise. Be proactive if cracks start to appear and move quickly to enhance communication. Consider how communications from opposing counsel in a matter should be managed (Rule 10). If your client agrees, consider informing opposing counsel of your limited role. Avoid giving the impression that you are providing full services to third parties. Consider if your office will be the address for service. This may not be appropriate if your role is limited to one discrete matter, as documents may still need to be received after your retainer has ended. Do not inadvertently become the Solicitor on the Record if this was not contemplated as part of your retainer, subject to any Court rules. You may need to seek leave of the Court to withdraw. Set out the terms on which the retainer will end or you can withdraw (subject to the Rules). Ensure that your client s expectations of the legal processes and fees are clearly communicated and effectively managed at all times. If the fee quoted or estimated is exceeded advise the client immediately before incurring further fees. Once a matter is concluded confirm this in writing if further instructions are given ensure that a new letter of engagement is provided setting out the terms of the new limited retainer. NZLS would like to acknowledge the Canadian Bar Association Alberta Branch, for its assistance in compiling this Practice Briefing New Zealand Law Society Law Society Building 26 Waring Taylor Street Wellington 6011 PO Box 5041 Lambton Quay Wellington Information in the Practice Briefing series is provided by the Law Society as a service to members. This briefing is intended to provide guidance and information on best practices. Some of the information and requirements may change over time and should be checked before any action is taken. Page 7